Sharia Ruling Sends Shockwaves Through Pakistan’s Crypto Ambitions
A fatwa issued on June 10 by prominent Islamic scholar Mufti Taqi Usmani has ignited a fierce debate over Pakistan’s emerging digital asset framework, challenging the country’s push to regulate and integrate cryptocurrencies under Islamic law. The ruling, issued by scholars at Darul Ifta, Jamia Darul Uloom Karachi, declared that cryptocurrencies do not qualify as “maal” (wealth) under Sharia principles. The religious edict labelled digital assets “fictitious numerical entries” and explicitly included USDT and similar tokens in the prohibition.
The fatwa’s broad language represents the most significant religious challenge to date for Pakistan’s nascent crypto regulatory architecture. By categorising cryptocurrencies as non-wealth, the ruling strikes at the foundational question of whether blockchain-based instruments can be recognised as legitimate property under Islamic jurisprudence. This matters profoundly in a country where religious compliance carries substantial weight in both public policy and consumer behaviour.
Mufti Taqi Usmani commands considerable authority in Islamic finance circles globally. His rulings on financial instruments have historically shaped how Muslim-majority countries approach banking, insurance, and investment products. The June 10 fatwa therefore extends well beyond a theological pronouncement. It creates immediate uncertainty for any Pakistani institution seeking to build Sharia-compliant crypto services.
The distinction between “maal” and non-“maal” is not merely semantic in Islamic law. Wealth, as recognised by Sharia, must possess certain characteristics including tangibility, storability, and the ability to be possessed and transferred. The scholars at Darul Ifta determined that cryptocurrencies fail these tests, rendering them ineligible for the legal protections and obligations that apply to recognised forms of property.
PVARA Chairman Pushes Back With Asset-Specific Approach
Bilal bin Saqib, chairman of Pakistan’s Virtual Assets Regulatory Authority (PVARA), responded by meeting directly with Usmani to present a counterargument. Saqib contended that digital assets should be assessed individually rather than as a single monolithic category. He argued that technologies like blockchains, stablecoins, and tokenised real-world assets differ fundamentally in their function and must undergo both technical and Shariah scrutiny separately.
The PVARA chairman’s approach reflects a growing view among Islamic finance practitioners that blanket rulings on cryptocurrency fail to account for the diversity of blockchain-based instruments. A stablecoin backed by fiat reserves, for instance, presents different Sharia considerations than a utility token or a tokenised piece of real estate. Saqib’s position is that collapsing all digital assets into a single category overlooks these critical distinctions.
According to Saqib, both parties at the meeting agreed on the importance of protecting citizens from “fraud, exploitation, and financial harm.” This shared concern suggests that the disagreement centres not on whether risks exist in the crypto sector, but on whether a blanket rejection is the appropriate response. Saqib emphasised that the fatwa’s broad rejection overlooks the structural and functional differences between various digital asset classes.
The meeting between the regulator and the scholar underscores the unusual regulatory terrain Pakistan navigates. Unlike secular jurisdictions where financial regulation proceeds primarily through legislative and administrative channels, Pakistan’s framework explicitly incorporates religious compliance. This means regulatory decisions must satisfy both technical financial criteria and religious jurisprudential standards.
For more developments on how regulators are engaging with digital asset frameworks, see our regulatory coverage.
Virtual Assets Act Faces Religious Compliance Test
The dispute directly impacts Pakistan’s Virtual Assets Act, passed in March, which established PVARA as a permanent federal regulator with authority to license exchanges, custodians, and token issuers. The legislation represented a milestone for Pakistan, positioning the country alongside a small group of jurisdictions that have created dedicated crypto regulatory bodies. Under the law, firms operating in Pakistan’s crypto sector must ensure their services comply with Sharia law, guided by a committee of Islamic finance scholars.
This Sharia compliance requirement was always going to be a defining feature of Pakistan’s crypto regime. The fatwa now threatens to undermine the framework before it has fully operationalised. If cryptocurrencies are deemed non-wealth under Sharia, Pakistan’s entire licensed crypto ecosystem could face legal and religious invalidation. Exchanges would struggle to operate. Custodians would hold assets that religious authorities do not recognise as legitimate property. Token issuers would find their products without religious sanction.
The stakes extend beyond domestic market participants. Pakistan has been pursuing a sovereign stablecoin, state-asset tokenisation, and crypto exchange licensing as part of a broader strategy to become a regional hub for Sharia-compliant digital finance. Each of these initiatives now faces uncertainty in light of the fatwa.
A sovereign stablecoin, for example, would presumably be backed by state reserves. Under Saqib’s asset-specific approach, such an instrument might qualify for Sharia treatment distinct from unbacked cryptocurrencies. The fatwa’s explicit inclusion of USDT, however, suggests that stablecoins face particular scrutiny regardless of their backing structure. This creates a complicated landscape for Pakistan’s sovereign stablecoin ambitions.
State-asset tokenisation faces a different set of questions. If Pakistan tokenises physical state assets, the underlying instruments would presumably qualify as “maal” given their tangible nature. The question then becomes whether the tokenised representation of those assets inherits the Sharia status of the underlying property. This is precisely the kind of distinction Saqib urged Usmani to consider.
Crypto exchange licensing, meanwhile, depends on exchanges having legitimate assets to trade. If the assets themselves are deemed non-wealth, the licensing framework loses its practical foundation. PVARA would be licensing firms to facilitate transactions in instruments that religious authorities have declared fictitious.
Regional Ambitions Hang in the Balance
Pakistan’s strategy to become a regional hub for Sharia-compliant digital finance depends on resolving the tension between regulatory ambition and religious authority. The country occupies a unique position in the global crypto landscape. It has a large unbanked population, significant remittance flows, and a government increasingly interested in digital innovation. These factors make crypto adoption potentially transformative for financial inclusion. Yet the same religious considerations that make Pakistan a natural candidate for Sharia-compliant crypto also constrain what its regulators can authorise.
The clash between PVARA and the fatwa illustrates a broader challenge facing Muslim-majority countries seeking to participate in the digital asset economy. Islamic finance has developed sophisticated frameworks for conventional financial instruments, from sukuk to takaful to Islamic mutual funds. Crypto presents a different order of complexity because the underlying technology creates asset categories that did not exist when classical Sharia principles were formulated.
The concept of “maal” itself is subject to extensive jurisprudential debate. Different schools of Islamic law have historically disagreed on what constitutes wealth, with some requiring physical tangibility and others accepting broader definitions. The Darul Ifta ruling appears to adopt a narrower interpretation, one that excludes digital assets by definition. Whether other scholars or institutions will issue competing rulings remains to be seen.
For Pakistan, the path forward likely involves the kind of granular, asset-by-asset analysis that Saqib proposed. Rather than seeking a single ruling on “cryptocurrency” as a category, PVARA may need to present specific instruments for Sharia review. A tokenised government bond, a fiat-backed stablecoin issued under state supervision, and a commodity-backed token each present distinct Sharia questions. Treating them separately could allow some products to proceed even if others remain prohibited.
This approach would require significant technical capacity from the Sharia scholars involved. Understanding the difference between a permissioned blockchain and a public ledger, or between a custodied stablecoin and an algorithmic one, demands familiarity with concepts that are far from traditional Islamic scholarship. PVARA’s commitment to both technical and Shariah scrutiny suggests the regulator recognises this challenge.
Analytical Outlook
The fatwa from Darul Ifta represents a serious but not necessarily fatal obstacle to Pakistan’s crypto regulatory ambitions. Saqib’s engagement with Usmani demonstrates that dialogue remains possible, and the shared concern about fraud and financial harm provides common ground. The outcome will likely depend on whether PVARA can construct a framework granular enough to satisfy religious authorities while still providing a workable regulatory environment for digital asset firms. If Pakistan succeeds, it could establish a template for Sharia-compliant crypto regulation that other Muslim-majority countries might follow. If it fails, the country risks ceding ground to less religiously constrained jurisdictions and losing its first-mover advantage in Islamic digital finance.
