TLDR
Pakistans new crypto licensing regime now collides with a powerful Islamic fatwa that labels most cryptocurrencies invalid under Sharia, creating deep uncertainty for users and banks.
- A June fatwa from Jamia Darul Uloom Karachi rejects Bitcoin, Ethereum and stablecoins as wealth, while Pakistans new Virtual Assets Act actively licenses crypto firms.
- This clash could slow mainstream, bank-led adoption even as Pakistan remains one of the worlds highest-usage crypto markets, with roughly 40 million users.
- Regulators are now negotiating asset-by-asset distinctions (like tokenized sukuk and fully backed stablecoins), and outcomes will shape how halal crypto is defined in Pakistan.
Deep Dive
1. What The Fatwa And New Rules Say
In June, the major seminary Jamia Darul Uloom Karachi issued a fatwa, signed by prominent scholar Mufti Muhammad Taqi Usmani and others, stating that cryptocurrencies including Bitcoin (BTC), Ethereum (ETH), tokens and stablecoins such as Tether (USDT) do not qualify as maal (wealth) under Islamic law and are not valid means of payment. This effectively brands most current crypto activity as religiously impermissible for observant Muslims in Pakistan.
At the same time, Pakistans March 2026 Virtual Assets Act created the Pakistan Virtual Assets Regulatory Authority (PVARA) as a statutory licensing body for digital assets, and in April the State Bank of Pakistan allowed banks to open accounts for PVARA-licensed firms, ending years of effective banking exclusion for regulated crypto businesses, as detailed in a recent policy explainer.
The state is formally integrating crypto into its financial system just as influential religious authorities are rejecting it, putting ordinary users between two conflicting signals.
2. Effects On Users, Banks And Adoption
Pakistan already ranks third globally in the 2025 Chainalysis Global Crypto Adoption Index, with about 40 million users by mid-2026, according to the same analysis. So the fatwa does not hit a niche community; it touches a mass market.
Local market participants note that trading volumes have remained steady so far, but analysts warn that the ruling could deter traditional banks and conservative investors from engaging with licensed platforms, limiting growth beyond younger urban traders. The risk is a dual system where regulated venues exist in law but religiously observant users hesitate to use them.
For now, crypto in Pakistan may stay concentrated among higher-risk-tolerant users, while bank-driven adoption and institutional products stall until religious concerns are addressed.
3. How The Clash Could Be Resolved
PVARAs chairman Bilal bin Saqib has asked the seminary for clarification and is in talks to categorize digital assets, arguing that blockchain-recorded sukuk (Islamic bonds) and gold-backed or fully reserved stablecoins linked to tangible assets differ from speculative tokens without underlying value. The law already anticipates these tensions by requiring a Shariah Advisory Committee as part of the regulatory setup.
Key signals to watch include:
- Whether the seminary issues follow-up guidance differentiating asset types (for example, tokenized sukuk vs meme coins).
- Any formal recognition of specific Sharia-compliant stablecoins or tokenized instruments.
- Changes in bank policies and product offerings once scholars respond to PVARAs proposals.
If scholars accept tightly backed, asset-linked tokens while rejecting purely speculative coins, Pakistan could become a testbed for explicitly Sharia-compliant crypto structures.
Conclusion
Pakistans situation is not just another regulatory tweak; it is a direct collision between formal digital asset law and a highly influential religious ruling in one of the worlds biggest crypto user bases. The eventual compromisewhether strict exclusion, partial acceptance of asset-backed tokens, or a broader reclassificationwill shape how Islamic finance and crypto interact, in Pakistan and potentially across other Muslim-majority markets watching this debate.
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