Pakistan’s top virtual assets regulator has called for a more detailed religious and technical review of digital tokens after a prominent Islamic legal ruling declared cryptocurrency purchases, including those made with USDT, impermissible under Sharia law.
Bilal bin Saqib, chairman of the Pakistan Virtual Assets Regulatory Authority (PVARA), met leading Islamic scholar Mufti Taqi Usmani after a fatwa issued by scholars from Darul Ifta at Jamia Darul Uloom Karachi circulated publicly. The ruling said cryptocurrencies do not qualify as “maal,” or wealth, under Islamic jurisprudence, and therefore cannot be used in valid transactions.
Saqib said after the meeting that blockchain-based products should not be judged as a single category. He argued that different digital assets, including stablecoins, tokenized real-world assets, and other blockchain instruments, require separate examination from both a technical and religious perspective.
The discussion comes at a sensitive moment for Pakistan’s digital finance policy. The country has created a new legal framework for virtual assets, is considering a sovereign stablecoin, and has discussed tokenizing state-backed assets. At the same time, religious approval remains central to whether digital finance products can be widely adopted in a country where Islamic banking and Sharia compliance carry major legal and public importance.
The fatwa has increased uncertainty for crypto traders, businesses, and policy officials who are trying to understand how digital assets can fit within Pakistan’s financial system. It has also raised practical questions about whether payments made through cryptocurrencies, including dollar-linked tokens such as USDT, can be recognized for purchases of goods or services.
Regulator calls for separate review of digital assets
Saqib said his conversation with Usmani focused on risk prevention, consumer protection, and the need to distinguish between different uses of blockchain technology. He emphasized that unbacked cryptocurrencies, fiat-backed stablecoins, tokenized securities, and other digital instruments may carry different legal, technical, and religious characteristics.
His remarks suggested that Pakistan’s regulator does not want all tokens treated in the same way. Instead, PVARA appears to be pushing for a case-by-case approach in which each product is assessed according to its structure, backing, purpose, transfer mechanism, and risk profile.
That position differs from the approach taken in the religious ruling circulated this month. The fatwa treated cryptocurrencies broadly as numerical ledger entries that lack tangible form and do not meet the requirements of wealth under Islamic law.
Saqib did not say that Usmani had changed his view after the meeting. However, he called for continued dialogue among regulators, Islamic scholars, academics, and financial experts as Pakistan develops its digital asset framework.
The regulator’s position reflects a broader challenge facing countries with Islamic finance systems. Digital assets can take many forms. Some are volatile and unbacked. Others are pegged to traditional currencies. Some represent ownership claims in real-world assets, while others provide access to decentralized software networks. Determining whether these instruments meet Islamic legal standards depends on questions of ownership, uncertainty, speculation, backing, custody, and actual economic use.
Fatwa rejects cryptocurrency as recognized wealth
The religious ruling was issued on June 10 by Usmani and other scholars from Darul Ifta at Jamia Darul Uloom Karachi, one of Pakistan’s most influential Islamic seminaries. It stated that cryptocurrencies are not recognized as “maal” under Islamic jurisprudence.
In Islamic commercial law, the concept of maal is important because it helps determine whether something can be owned, traded, sold, or used in payment. If an item does not qualify as wealth, then transactions based on it may be considered invalid.
The fatwa described cryptocurrencies as numerical entries recorded on ledgers rather than tangible or recognized assets. On that basis, it concluded that they cannot be used as legitimate payment instruments under Sharia law.
The ruling extended this interpretation to purchases made with USDT and other tokens. It said transactions involving goods or services bought with cryptocurrencies were invalid. It also instructed users who had purchased physical books or digital lessons with cryptocurrency to return the items or delete the digital material.
That part of the ruling drew particular attention because it moved beyond the holding of tokens and addressed everyday transactions. If accepted broadly, it could affect merchants, educators, digital service providers, and customers who have used crypto payments, even in small amounts.
USDT was specifically mentioned because it is widely used as a dollar-linked stablecoin in global crypto markets. While stablecoins are often presented as less volatile than unbacked tokens, the fatwa did not draw a legal distinction between stablecoins and other cryptocurrencies.
Pakistan’s law requires Sharia assessment
The debate is unfolding only months after Pakistan’s parliament approved the Virtual Assets Act in March. The law gave PVARA authority to license and regulate exchanges, custodians, token issuers, and other virtual asset service providers.
A key part of the law is its requirement that licensed entities and products undergo evaluation by Islamic finance scholars. These reviews are meant to determine whether virtual asset activities comply with religious principles.
That requirement makes Pakistan’s framework different from many digital asset regimes elsewhere. In Pakistan, regulatory approval alone may not be enough. Market participants may also need confirmation that the relevant activity is acceptable under Islamic law.
The law appears to allow regulators and scholars to distinguish between different blockchain products. For example, a token backed by government assets could be reviewed differently from a highly volatile unbacked cryptocurrency. A fiat-backed stablecoin could be assessed differently from a token that represents equity, debt, or rights in a physical asset.
Saqib’s comments after meeting Usmani align with that structure. He stressed that each blockchain-based product should be considered independently. The fatwa, however, placed token types into a broader category and rejected them collectively as valid wealth.
This tension now sits at the center of Pakistan’s emerging digital finance strategy. Regulators are trying to build a system that can attract compliant financial technology firms, support cheaper payments, and protect consumers. Religious scholars are focusing on whether the underlying instruments meet the conditions of valid ownership and exchange under Sharia law.
Crypto adoption adds urgency
Pakistan is considered one of the most active countries in digital asset use, with a large base of crypto users and digital wallet holders. PVARA has previously referred to an estimated crypto user base of around 40 million, while other public discussions have cited more than 27 million active digital wallets.
The country also ranks near the top of global crypto adoption measures. Strong public interest has been supported by several factors, including a young population, widespread mobile phone use, limited access to some traditional financial services, inflation concerns, and demand for fast cross-border transfers.
Pakistan’s remittance market is another major factor. Money sent home by overseas Pakistanis now exceeds $38 billion annually. Reducing the cost and delay of cross-border transfers has become a policy priority, and digital payment systems are often discussed as one possible tool.
For officials, the goal is not simply to allow speculative trading. The broader policy ambition includes regulated transfers, tokenized assets, digital custody, blockchain-based settlement, and possibly state-backed digital instruments. These goals require legal clarity and religious acceptance if they are to develop at scale.
For traders, the fatwa adds uncertainty. It raises questions about whether holding tokens, using stablecoins, accepting digital payments, or buying goods through crypto could expose them to religious, legal, or commercial disputes.
Plans include stablecoins and tokenized state assets
Pakistan’s digital asset agenda has moved quickly this year. Officials have discussed plans for a sovereign stablecoin and the tokenization of government assets. These projects would require close coordination between financial regulators, Islamic scholars, technology providers, and the Finance Ministry.
PVARA has also invited licensed international digital asset firms to operate in the country under the new regulatory framework. Two global platforms received preliminary regulatory clearance in December, although local operations have not yet begun.
Separately, the Finance Ministry entered a non-binding agreement with one international platform to advise on tokenizing up to $2 billion in sovereign bonds, commodities, and treasury assets. The proposal would require careful legal structuring, particularly because tokenized government assets may involve issues related to ownership rights, income streams, debt obligations, custody, and transferability.
Tokenization of state assets could be reviewed differently from open-market cryptocurrencies. If a token clearly represents a real asset, such as a commodity or a government-backed instrument, scholars may examine whether it satisfies requirements for ownership, possession, transparency, and lawful use. But if a token is seen only as a tradable digital entry without recognized underlying value, it may face stronger objections.
This is why Saqib’s call for separate review is significant. It suggests that Pakistan’s regulator wants to preserve room for compliant blockchain projects even if some cryptocurrencies are rejected under religious standards.
Power allocation for mining and data centers
The government has also allocated 2,000 megawatts of power for Bitcoin mining and artificial intelligence data centers. That decision drew attention because energy policy, computing infrastructure, and digital assets are becoming linked in Pakistan’s development plans.
Bitcoin mining uses large amounts of electricity to secure the Bitcoin network and process transactions. Supporters of such projects often argue that mining can monetize surplus power, attract technology infrastructure, and create new sources of revenue. Critics point to energy shortages, environmental costs, and the volatility of mining economics.
Saqib has said that blockchain-related projects tied to these plans could require separate Sharia assessments. That means even if infrastructure projects move ahead, the digital assets connected to them may still need religious and legal approval.
The allocation also highlights how broad Pakistan’s digital strategy has become. The debate is no longer limited to people buying and selling tokens. It now includes data centers, artificial intelligence infrastructure, sovereign financing, payment systems, and the possible digitization of government-linked assets.
Other scholars enter the debate
Recent public discussion has also prompted another religious scholar, identified in local debate as Rehman, to clarify that he has not issued any formal bans against digital coins. His comments added another dimension to the discussion by arguing that traditional gold trading, as currently practiced in some cases, may also be problematic under his review.
That intervention showed that the religious debate is not limited to cryptocurrencies alone. Islamic commercial law has long examined the conditions under which gold, currencies, debt, and other financial instruments may be traded. Issues such as immediate possession, excessive uncertainty, deferred exchange, and speculation can affect rulings across both traditional and digital markets.
The comparison with gold is important because many ordinary savers see gold as a familiar and religiously acceptable asset. If some forms of gold trading are also disputed, it suggests that the core issue is not simply whether an asset is physical or digital. The legal structure of the transaction, the timing of delivery, the level of uncertainty, and the presence of real ownership may matter just as much.
Still, Usmani’s ruling carries particular weight because of his authority in Islamic finance. He is widely regarded as one of the most influential scholars in the field, and his views are followed closely by Islamic banks, regulators, and financial institutions.
Traders face uncertain rules
For crypto traders in Pakistan, the immediate problem is uncertainty. The Virtual Assets Act has created a regulatory path, but the fatwa has raised serious religious objections to the use of cryptocurrencies in transactions.
If a person buys a physical product, a course, a digital file, or another service with cryptocurrency, the fatwa suggests the transaction is invalid and should be reversed. That could create difficult disputes if a merchant has already delivered the product, if the token value has changed, or if the parties cannot practically undo the transaction.
Businesses that accept crypto payments may also face reputational and legal risks until there is clearer guidance. Even stablecoin payments, often used because they track the U.S. dollar, may not be safe from religious objections if scholars continue to treat them like other cryptocurrencies.
At the same time, regulators are unlikely to abandon the digital asset agenda completely. Pakistan’s large user base, remittance needs, and interest in tokenized finance have made virtual assets an important policy area. The key question is whether officials and scholars can identify structures that satisfy both regulatory standards and Sharia principles.
That may lead to a more segmented market. Unbacked cryptocurrencies could face strict limits or rejection, while asset-backed tokens, regulated stablecoins, or government-linked digital instruments may receive deeper review. The final outcome will depend on future guidance from PVARA, Islamic finance boards, the Finance Ministry, and senior religious authorities.
Religious approval becomes central to digital finance policy
The dispute over whether cryptocurrencies qualify as wealth now stands as a major test for Pakistan’s digital finance plans. The country wants to regulate virtual assets, attract compliant platforms, reduce transfer costs, and explore tokenization. But these ambitions must pass through a religious review system that can shape what products are allowed and how they are used.
Saqib’s meeting with Usmani did not resolve the disagreement. It did, however, show that the government recognizes the need for continued engagement with Islamic scholars rather than treating digital assets only as a technology or financial regulation issue.
For now, Pakistan’s crypto policy remains in transition. The law gives regulators authority to license the sector, but religious rulings could determine which products become acceptable in practice. Stablecoins, tokenized government assets, and blockchain-based payment tools may each face separate scrutiny in the months ahead.
The outcome will matter not only for crypto traders but also for Pakistan’s wider financial modernization plans. If regulators and scholars find common ground, the country could move toward a controlled digital asset system built around compliance, consumer protection, and Sharia review. If the disagreement deepens, Pakistan’s digital finance agenda may slow, leaving millions of users and businesses waiting for clearer rules.
For deeper context on compliant crypto instruments and regulation, explore stablecoins and how they work in modern finance.
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