Pakistan regulator seeks dialogue after crypto fatwa

TLDR

Pakistan's crypto regulator is engaging Islamic scholars after a prominent religious ruling declared many crypto transactions impermissible under Sharia, putting faith and regulation on a collision course.

1. Leading scholar Mufti Taqi Usmani issued a fatwa saying cryptocurrencies and stablecoins like USDT are not valid wealth, while the regulator PVARA is pushing for continued dialogue and case-by-case review.
2. The ruling lands just as Pakistan rolls out the Virtual Assets Act 2026 and starts licensing exchanges and crypto firms, potentially complicating plans for state-backed stablecoins and tokenized assets.
3. Crypto users should watch how scholars and regulators classify different digital assets, as outcomes could range from broad restrictions to a Sharia-compliant framework that treats Bitcoin, stablecoins, and RWAs differently.

Deep Dive

1. Fatwa And Regulator Response

Mufti Taqi Usmani, one of Pakistans most influential Islamic scholars, and several colleagues at Jamia Darul Uloom Karachi issued a fatwa stating that cryptocurrencies, including stablecoins such as USDT, are fictitious numbers that do not meet Sharia criteria for property or wealth. The ruling goes further than banning speculative trading, saying purchases of books and online courses with crypto are invalid and should be reversed or deleted, effectively rejecting crypto as a lawful payment medium under this interpretation.

In response, Pakistan Virtual Assets Regulatory Authority (PVARA) chairman Bilal bin Saqib met Usmani and described the conversation as constructive, stressing that blockchains, stablecoins, tokenized real world assets and other digital assets should be assessed individually rather than under a single blanket verdict. He has publicly called for careful technical assessment alongside rigorous Shariah examination and ongoing dialogue among scholars, regulators and industry participants, as reported by Cointelegraph and Crypto.news.

2. Clash With Regulatory Push

The fatwa arrives just as Pakistan is shifting from years of restriction toward a regulated crypto sector. Parliament passed the Virtual Assets Act 2026, establishing PVARA as a statutory regulator for exchanges, custodians and token issuers, and in April the State Bank of Pakistan allowed banks to open accounts for licensed virtual asset service providers, ending an eight year banking ban for regulated crypto firms.

PVARAs mandate includes Sharia compliance: licensed firms are expected to align their services with guidance from Islamic finance scholars. According to detailed coverage from The Block via TradingView, Pakistan has even explored a sovereign stablecoin, tokenization of up to billions of dollars in state assets, and a potential state bitcoin reserve. A strict reading of Usmanis ruling could jeopardize such initiatives, while a more nuanced classification could allow fiat-backed stablecoins or tokenized securities to pass Sharia review even if unbacked crypto assets remain contested.

3. What Crypto Users Should Watch

Three signals matter for crypto users inside and outside Pakistan:

1. Whether scholars issue follow-up guidance that distinguishes categories, for example treating Bitcoin differently from fiat-backed stablecoins or tokenized bonds.
2. How PVARAs licensing rules evolve, including any formal Sharia committees that review products before approval and any categories explicitly barred.
3. The fate of state-linked projects such as a national stablecoin or tokenized sovereign assets, which could become models for Sharia-compliant crypto structures across the wider Islamic world.

For now, PVARA has not rolled back licensing efforts, but the religious ruling adds a powerful layer of risk to public acceptance. In a country where more than 96 percent of people identify as Muslim, a durable compromise between scholars and regulators would likely be required before mainstream crypto use can grow comfortably.

Conclusion

Pakistans crypto fatwa and the regulators push for dialogue highlight a core tension between rapidly evolving digital finance and religious law in a major Muslim country. The eventual classification of Bitcoin, stablecoins and tokenized assets under Sharia will shape not only Pakistans own virtual asset industry, but could also steer how other Islamic jurisdictions approach crypto. Watching how scholars and PVARA resolve this debate offers early insight into the future of Sharia-compliant crypto markets.