Pakistan’s crypto regulator PVARA is searching for a way to reconcile the country’s ambitious digital-asset strategy with the requirements of Islamic law. After one of the nation’s most influential religious ruling bodies declared payments made with cryptocurrencies impermissible, the authority is now pushing for a differentiated assessment: fully reserved stablecoins, gold-backed tokens, and tokenized sukuk should be treated differently from speculative cryptocurrencies with no underlying value.
The Fatwa That Triggered It All
On June 10, 2026, the Darul Ifta of Jamia Darul Uloom Karachi – one of South Asia’s most prestigious Islamic seminaries – issued a fatwa classifying the purchase of goods with cryptocurrencies as impermissible. Among the signatories is Mufti Muhammad Taqi Usmani, one of the world’s foremost authorities on Islamic finance, whose rulings have helped shape Sharia-compliant banking standards across numerous countries.
The core finding of the ruling: cryptocurrencies – explicitly including the stablecoin USDT – do not, in their current form, qualify as “maal” (recognized wealth) under Sharia. They are merely fictitious numerical entries in an account and therefore cannot serve as a valid means of payment. Notably, the fatwa was issued in response to a query about whether books and an online course could be paid for with crypto.
The implications are substantial. Pakistan, a nation of more than 240 million people, has ranked among the world’s largest crypto markets by retail activity for years, with estimates putting the number of digital-asset users at roughly 40 million. Moreover, rulings from Jamia Darul Uloom carry influence well beyond Pakistan – reaching into the Gulf states and Southeast Asia.
PVARA Calls for Case-by-Case Assessment Instead of a Blanket Ruling
Today, I had a constructive discussion with Mufti Taqi Usmani Sahib on digital assets and the ongoing conversation around their Shariah status.
We are united on one fundamental objective: protecting Pakistanis from fraud, exploitation, and financial harm.
I shared that…
— Bilal bin Saqib MBE (@Bilalbinsaqib) July 11, 2026
Bilal bin Saqib, chairman of the Pakistan Virtual Assets Regulatory Authority (PVARA), established under the Virtual Assets Act 2026, met personally with Mufti Taqi Usmani on July 11 and described the exchange as constructive. Speaking to Reuters on July 15, Saqib said he had formally asked the seminary for clarification: a distinction must be drawn between speculative cryptocurrencies and asset-backed digital tokens.
Saqib’s reasoning follows the internal logic of Islamic finance itself. The central question raised by the fatwa – whether a digital asset constitutes recognized wealth under Sharia – is precisely the right one, according to the PVARA chief. And that is exactly why these instruments must be examined individually:
- Tokenized sukuk (Islamic bonds) recorded on a blockchain represent ownership of a real, income-generating asset – a core principle of Sharia-compliant financial products.
- Gold-backed tokens and fully reserved stablecoins carry an enforceable claim on something tangible and redeemable. Gold has traditionally held the status of undisputed wealth in Islamic law.
- Blockchain technology itself should be understood as a record-keeping and verification technology, not a financial asset – and is therefore religiously neutral.
- Purely speculative tokens with no underlying asset, by contrast, form a separate category; the scholars’ concerns in that area must be taken seriously.
This taxonomy points to the direction Pakistan’s regulatory framework is likely to take: away from unbacked cryptocurrencies as a means of payment, toward asset-backed structures capable of withstanding the core principles of Islamic finance – the prohibitions on riba (interest), gharar (excessive uncertainty), and maysir (gambling).
A Stablecoin Agenda With a Geopolitical Dimension
The timing of the dispute is delicate for Islamabad. The government is simultaneously advancing several digital-asset initiatives: the tokenization of state assets, a sovereign stablecoin, and the licensing of crypto exchanges, with the first approvals expected in the coming months. Binance and HTX have already received initial clearance to enter the licensing process, and an agreement with Binance covers the possible tokenization of up to USD 2 billion in Pakistani assets.
Then there is the foreign-policy component: Islamabad has signed an agreement with an affiliate of World Liberty Financial – the flagship crypto business of US President Donald Trump’s family – to explore the use of its USD1 stablecoin for cross-border payments. The government itself calls this “crypto diplomacy.” A fatwa declaring all crypto payments impermissible would pull the religious ground out from under that strategy.
Equally notable is the legal framework itself: the Virtual Assets Act 2026, passed in March, explicitly embeds Sharia compliance in the regulatory regime. The conflict between the fatwa and the law is therefore not a side issue but a foundational question for Pakistan’s crypto policy.
Market Reaction and Analysis
In the short term, the impact on trading has been limited. Waqas Ghani, head of research at brokerage JS Global Capital, says trading volumes have so far appeared unaffected – but warns that in its current form, the fatwa could become an obstacle to broader, bank-led crypto adoption beyond Pakistan’s urban trading community.
This is exactly where the strategic significance of the stablecoin question lies. If PVARA succeeds in working out a differentiated assessment with the scholars of Jamia Darul Uloom, Pakistan could become the first major Muslim country to establish a framework for asset-backed digital tokens that is secured both by regulation and by religious authority – with ripple effects across the global Islamic finance market, estimated at more than USD 4 trillion. Saqib framed the ambition confidently: Pakistan has the opportunity to lead the world in Sharia-compliant digital finance, and that leadership must be built together with the scholars.
If no understanding is reached, the opposite scenario looms: a regulated market whose products are delegitimized by religious authority – in a country where fatwas shape the financial behavior of millions.
Outlook
Talks between PVARA, the seminary, and industry specialists are set to continue. The decisive question is whether the scholars will adopt the categorization proposed by Saqib – infrastructure, fully reserved stablecoins, gold-backed tokens, tokenized real-world assets, and speculative assets. For the global stablecoin industry, a favorable verdict from Karachi would be a precedent: for the first time, one of the highest authorities in Islamic finance would formally distinguish between fiat- or gold-backed tokens and conventional cryptocurrencies.
For Bitcoin and other unbacked cryptocurrencies, however, the path into Pakistan’s regulated payment system is likely to remain closed for now – while their religious classification as an asset class in licensed exchange trading remains subject to the ongoing review.
Sources (Primary and Original Sources)
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- Reuters (via TradingView, Ariba Shahid, July 15, 2026): Pakistan’s crypto push clouded by Islamic edict, regulator asks for clarification https://www.tradingview.com/news/reuters.com,2026:newsml_L8N43H0GJ:0-pakistan-s-crypto-push-clouded-by-islamic-edict-regulator-asks-for-clarification/
- Bilal bin Saqib (PVARA Chairman) on X, statement on his meeting with Mufti Taqi Usmani (July 11, 2026): https://x.com/Bilalbinsaqib
- Dawn (July 16, 2026): Crypto czar asks Jamia Darul Uloom to distinguish between speculative crypto, asset-backed tokens https://www.dawn.com/news/2015697/crypto-czar-asks-jamia-darul-uloom-to-distinguish-between-speculative-crypto-asset-backed-tokens
- Business Recorder (July 16, 2026): Govt seeks seminary guidance on crypto asset categories https://www.brecorder.com/news/40430257/govt-seeks-seminary-guidance-on-crypto-asset-categories
- The News International (July 16, 2026): PVARA seeks clarification as fatwa clouds Pakistan’s crypto push https://www.thenews.pk/print/1426379-pvara-seeks-clarification-as-fatwa-clouds-pakistan-s-crypto-push
- Pakistan Today (July 16, 2026): PVARA chief seeks distinction between speculative crypto and asset-backed tokens https://www.pakistantoday.com.pk/2026/07/16/pvara-chief-seeks-distinction-between-speculative-crypto-and-asset-backed-tokens
- Geo News (July 16, 2026): PVARA seeks Shariah distinction between crypto, digital tokens https://www.geo.tv/latest/673289-pvara-seeks-shariah-distinction-between-crypto-digital-tokens
- Pakistan Launches PVARA: A Milestone for Bitcoin and Virtual Assets
- Zawya/Reuters syndication (July 15, 2026): Pakistan’s crypto push clouded by Islamic edict, regulator asks for clarification https://www.zawya.com/en/world/indian-sub-continent/pakistans-crypto-push-clouded-by-islamic-edict-regulator-asks-for-clarification-b2gnu8g8
Note on the fatwa’s primary source: The original ruling was issued by the Darul Ifta of Jamia Darul Uloom Karachi (dated 24 Zilhaj 1447 AH / June 10, 2026) and is in Urdu; an official online publication can be verified via the seminary’s websites (banuri.edu.pk / darululoomkarachi.edu.pk).
Pakistan Launches PVARA: A Milestone for Bitcoin and Virtual Assets