Pakistan's digital-asset ambitions are facing a test of both regulatory and religious legitimacy after influential Islamic scholars issued a fatwa saying cryptocurrency purchases, including those made with Tether (USDT), the most-used stablecoin, should not be allowed.
Pakistan’s Crypto Boom Clashes with Sharia Pushback as Regulator Seeks Compromise
13 July 2026 - 07:22 CEST
Non-binding but influential
While the religious ruling is not legally binding, it carries significant weight in shaping Islamic guidance for individuals, and it arrives at a sensitive time for a country ranked third in Chainalysis's 2025 Global Crypto Adoption Index, behind India and the US, and now developing regulations for exchanges, banks and virtual-asset firms. The fatwa was issued by Darul Ifta, the religious rulings department at Jamia Darul Uloom in Karachi.
Pakistan's crypto authorities had previously signalled a need for sharia review alongside technical regulation. A sharia review is a formal assessment of whether an activity or product complies with Islamic legal principles.
Not seen as wealth
The fatwa, issued on 10 Jun, was signed by Islamic scholar Mufti Taqi Usmani – a former judge of the Federal Shariat Court who heads the Wifaq-ul-Madaris seminary board and helped shape the sharia standards used across Islamic finance – along with five other prominent scholars, the Pakistani English-language newspaper Dawn said. It declared that purchasing goods with cryptocurrency was "impermissible," citing expert research that cryptocurrency does not qualify as wealth.
In response to a question about whether cryptocurrencies could be used to buy books, the fatwa said: "It is not permissible for you to purchase the books in question using cryptocurrency," adding that digital currencies are not regarded as 'maal,' or wealth, in sharia. "Instead, it is merely the recording of fictitious numbers in an account, whether in the form of USDT or other crypto tokens," Dawn reported.
Crypto chief responds
The ruling prompted a quick and conciliatory response from Chairman of Pakistan's Virtual Assets Regulatory Authority (PVARA) Bilal Bin Saqib, who holds the status of a minister of state. In an 11 Jul post on X, Saqib said he had a "constructive discussion" with Usmani about the sharia status of cryptocurrencies.
"We are united on one fundamental objective: protecting Pakistanis from fraud, exploitation, and financial harm," Saqib posted. "I shared that blockchain, digital assets, stablecoins, and tokenized real-world assets represent a broad spectrum of technologies and use cases. As such, they merit careful technical assessment alongside rigorous sharia examination, rather than being viewed through a single lens."
Active digital trading
Saqib told Consensus Hong Kong in February 2026 that around 40mn Pakistanis trade digital assets.
The clerics specifically named USDT, which dominates the stablecoin market with a global capitalization of around $184bn as of mid-July, according to DefiLlama. For many Pakistanis, USDT functions as a digital proxy for the dollar in a market shaped by currency volatility and payment frictions. Much of that use runs through peer-to-peer channels outside formal reporting systems, making the amount in circulation hard to quantify.
Foreign exchanges wary
The clash may give pause to foreign cryptocurrency exchanges seeking a foothold in Pakistan. Binance, the world's biggest cryptocurrency exchange by trading volume, has been especially visible, with former CEO Changpeng Zhao, known as CZ, making high-profile visits to Islamabad to advise the sector.
CZ was appointed a strategic adviser to the Pakistan Crypto Council (PCC), and Binance signed a memorandum of understanding with Pakistan's Finance Ministry to explore the tokenization of up to $2bn in Pakistani sovereign bonds, treasury bills and commodity reserves.
Another foreign exchange eyeing Pakistan's market is HTX, formerly Huobi, which received a Pakistani No Objection Certificate in December 2025 and had begun the process towards full licensing under the country's virtual-asset regime.
Not a deal-breaker
A regulatory expert on Asia and Middle East digital assets, who asked not to be named, told Sandmark that the fatwa was not a decisive obstacle for the sector and was unlikely to be mirrored in other Muslim-majority nations, noting that sharia compliance "remains largely a matter of interpretation with differing opinions and approaches" across the region.
"While the fatwa carries implications for those who strictly observe it, the sector is likely to continue expanding, given the distinction between a religious decree and a formal legal prohibition, a distinction comparable to the offering of interest by local banks notwithstanding the non-permissibility of interest-based dealings under Islamic principles," he said.
He noted that several Muslim-majority jurisdictions, including the United Arab Emirates (UAE), Bahrain, Qatar and Indonesia, have established crypto regulatory frameworks, and in some cases sharia-compliant regimes such as Bahrain's sharia-compliant stablecoin framework and Indonesia's regulatory sandbox.
Indonesia's crypto fatwa
Indonesia, home to the world's largest Muslim population, had its own encounter with a crypto fatwa in 2021, after the Indonesian Ulema Council declared cryptocurrency 'haram,' or forbidden, as a currency. The government did not ban crypto trading, instead choosing to regulate, license and allow cryptocurrency as an investment commodity.
Islamic financial institutions are also not shunning the space, with Ruya Bank in the UAE offering sharia-compliant Bitcoin (BTC) investments in late 2025, the expert added.
Building on foundation
Saqib, who has been promoting Islamabad's Web3 ambitions at public forums, has said that while 2025 was spent building the foundation, this year would focus on scaling the architecture.
As in many developing economies, cryptocurrencies and blockchain help solve structural problems for young, underbanked populations, offering cheaper remittances. Pakistan received a record $41.6bn in remittances in the fiscal year that ended on 30 Jun, according to the State Bank of Pakistan, and stablecoins make such transfers faster and cheaper, Saqib has argued.
The objection to stablecoins sits at odds with the state's own outreach to foreign issuers: in January, the Finance Ministry signed a non-binding MoU with SC Financial Technologies, an affiliate of the Trump-linked World Liberty Financial, to explore using its USD1 stablecoin for cross-border payments, though officials have said no pilot or transactions have followed.
The South Asian country's priorities for developing the token economy include full licensing for wallets, custodians, brokers and token issuers; stablecoin work with the central bank; tokenization of assets such as sovereign bonds and treasury bills; and building an AI-native regulator for licensing, supervision and market oversight.
