Pakistan regulator seeks review of crypto fatwa as digital asset reforms gather pace

Pakistan's virtual assets regulator is seeking fresh guidance from the country's leading Islamic seminary after a recent religious ruling on cryptocurrencies raised questions over the future of the government's digital asset agenda.

Bilal bin Saqib, chairman of the Pakistan Virtual Assets Regulatory Authority (PVARA), told Reuters that the regulator has asked Jamia Darul Uloom Karachi to evaluate different categories of digital assets separately, arguing that not all blockchain-based instruments should be treated the same under Islamic law.

The move follows a fatwa issued by the seminary in June, which concluded that cryptocurrencies do not currently constitute wealth under Shariah and therefore cannot be used as a valid means of payment. The ruling was issued in response to a question regarding the purchase of books and an online course using cryptocurrency.

According to Saqib, the key issue raised by the fatwa is whether a digital asset qualifies as recognised wealth under Shariah, a question he said should be answered on an asset-by-asset basis rather than through a blanket assessment of all digital tokens.

He said blockchain-recorded sukuk (Islamic bonds) represent ownership of real, income-generating assets, while gold-backed tokens and fully reserved stablecoins provide legally enforceable claims on tangible assets that can be redeemed. Blockchain technology itself, he added, should be viewed simply as a system for recording and verifying transactions rather than as a financial asset.

Saqib also acknowledged that Islamic scholars' reservations regarding purely speculative cryptocurrencies lacking underlying assets are valid and deserve careful consideration.

The regulator's engagement with religious scholars comes as Pakistan accelerates efforts to establish a regulated digital asset ecosystem. Authorities are working on a licensing framework for cryptocurrency exchanges, with licences expected to be issued in the coming months, while also exploring the tokenisation of state-owned assets.

Pakistan, an Islamic nation of more than 240 million people, has consistently ranked among the world's largest retail cryptocurrency markets despite operating without a comprehensive regulatory framework until recently.

Digital assets have also become part of Islamabad's broader engagement with Washington. Earlier this year, Pakistan signed an agreement with an affiliate of World Liberty Financial—the primary cryptocurrency venture of US President Donald Trump's family—to explore using its USD1 stablecoin for cross-border payments, an initiative the government has described as part of its "crypto diplomacy."

Market participants say the fatwa could complicate efforts to expand digital asset services through the banking sector. Waqas Ghani, head of research at JS Global Capital, said the ruling could become an obstacle to broader bank-led adoption beyond Pakistan's urban crypto trading community, although trading activity has so far remained largely unaffected.

Jamia Darul Uloom Karachi did not immediately respond to Reuters' request for comment. Mufti Muhammad Taqi Usmani, one of the scholars involved in issuing the fatwa, also did not respond to a request for comment.

Saqib said PVARA would continue consulting Islamic scholars as Pakistan finalises its regulatory framework, particularly in relation to stablecoins and the tokenisation of real-world assets. He said the country has the potential to become a leader in Shariah-compliant digital finance if the regulatory framework is developed in partnership with religious scholars.