Pakistan's virtual assets regulator has called for continued dialogue on the treatment of digital assets under Islamic law after meeting a prominent scholar who endorsed a ruling against purchases made with cryptocurrencies. The exchange underscores the delicate balance between the country's burgeoning crypto ambitions and the religious sensitivities of its overwhelmingly Muslim population.

Pakistan Virtual Assets Regulatory Authority (PVARA) Chairman Bilal bin Saqib revealed the meeting in a social media post on Saturday, stating that the discussion covered a broad spectrum of topics including blockchain technology, digital assets, stablecoins, and tokenized real-world assets (RWAs). Saqib emphasized the need to protect Pakistanis from fraud, exploitation, and financial harm, while also ensuring that the country does not fall behind in the global digital economy.

The discussion came shortly after Mufti Taqi Usmani, one of the world's most influential Islamic scholars, signed a legal ruling issued by Jamia Darul Uloom Karachi, a leading Islamic seminary in Pakistan. The ruling, released on Friday, declared that purchases made with cryptocurrencies, including stablecoins like USDT, are not permissible under Islamic law. According to the ruling, digital tokens do not qualify as recognized property or wealth under Sharia principles, which require tangible assets or recognized currency for transactions.

Saqib did not directly challenge the ruling but instead called for a more nuanced approach. In his post, he noted that different categories of digital assets merit careful technical assessment alongside rigorous Sharia examination, rather than being viewed through a single lens. He said that blockchain, digital assets, stablecoins, and tokenized real-world assets represent a broad spectrum of technologies and use cases, and that each should be evaluated on its own merits.

Background on Mufti Taqi Usmani and His Influence

Mufti Taqi Usmani is a highly respected figure in Islamic jurisprudence, serving as a senior scholar at Jamia Darul Uloom Karachi and as a former judge of the Federal Shariat Court of Pakistan. His opinions on financial matters carry significant weight not only in Pakistan but also in other Muslim-majority countries and among Islamic finance institutions worldwide. Usmani has been a vocal critic of conventional interest-based banking and has advocated for Sharia-compliant alternatives. His involvement in the cryptocurrency debate is therefore a major development for the industry in Pakistan.

The ruling signed by Usmani and five other scholars specifically addressed the use of cryptocurrencies for purchases, stating that digital tokens cannot be considered valid currency or property under Sharia. The scholars argued that cryptocurrency lacks intrinsic value, is not backed by any tangible asset, and is subject to extreme volatility, making it unsuitable for transactions under Islamic principles. However, the ruling did not explicitly address other uses of blockchain technology, such as tokenized assets or smart contracts, leaving room for further discussion.

Pakistan's Crypto Regulatory Evolution

Pakistan has been gradually opening up to the virtual asset sector after years of restrictive policies. In March 2026, the country passed the Virtual Assets Act 2026, which established PVARA as the statutory body responsible for licensing and oversight of virtual asset activities. The act marked a significant shift from the earlier stance of the State Bank of Pakistan, which had banned banks from dealing with cryptocurrencies in 2018.

On April 15, 2026, the State Bank of Pakistan took a further step by allowing banks to open accounts for virtual asset service providers (VASPs) licensed by PVARA. This move ended an eight-year restriction on regulated institutions dealing with crypto and was seen as a major boost for the industry. The decision was part of the government's broader efforts to regulate and harness the potential of digital assets while mitigating risks such as money laundering and terrorism financing.

The PVARA has been tasked with creating a comprehensive regulatory framework that balances innovation with consumer protection. The authority has been engaging with stakeholders including exchanges, blockchain startups, and Islamic scholars to develop rules that are both effective and culturally appropriate.

Sharia Compliance and Digital Assets

The issue of Sharia compliance is critical for the adoption of cryptocurrencies in Muslim-majority countries. Pakistan, with a population of over 230 million Muslims, represents a significant potential market for digital assets. However, religious rulings can heavily influence public perception and acceptance. The recent ruling against crypto purchases could dampen enthusiasm among conservative Muslims, but it also opens the door for more sophisticated discussions about which digital assets might be permissible.

Some Islamic scholars have argued that cryptocurrencies can be considered permissible if they meet certain criteria, such as being backed by tangible assets or used in a way that avoids speculation and interest. Tokenized real-world assets, where digital tokens represent ownership of physical assets like real estate or commodities, have been proposed as a Sharia-compliant alternative. Stablecoins pegged to fiat currencies or commodities could also be seen as more acceptable, provided they are transparent and properly regulated.

The PVARA chairman's call for careful technical assessment aligns with this perspective. By distinguishing between different categories of digital assets, regulators and scholars can potentially find common ground. For instance, a stablecoin fully backed by US dollars held in a regulated bank might be treated differently from a volatile cryptocurrency used for speculative trading.

Broader Implications for the Islamic Finance Market

Pakistan is not the only Muslim-majority country grappling with the regulation of digital assets. Several Gulf states have taken more progressive stances, with the United Arab Emirates establishing a regulatory framework for cryptocurrencies and Saudi Arabia exploring blockchain applications. The global Islamic finance market is estimated to be worth over $3 trillion, and there is growing interest in leveraging blockchain technology for Sharia-compliant products.

Recently, the PUSD stablecoin deployed on the ADI Chain, targeting the Islamic finance market. This development indicates that there is demand for digital assets that align with Islamic principles. However, such initiatives require careful design to ensure compliance with Sharia law, including prohibitions on interest (riba), excessive uncertainty (gharar), and gambling (maysir).

The dialogue between PVARA and Mufti Taqi Usmani could set a precedent for how other Muslim-majority countries approach the issue. If Pakistan can develop a regulatory framework that accommodates both innovation and religious values, it could become a leader in the Islamic crypto space. Conversely, a blanket rejection of digital assets could stifle growth and drive users to unregulated platforms.

Next Steps and Industry Reactions

Industry stakeholders have reacted cautiously to the ruling. Some crypto exchanges in Pakistan have expressed willingness to engage with religious scholars to find common ground. Others have pointed out that the ruling specifically addresses purchases made with crypto, and does not necessarily prohibit holding or trading digital assets as investments, though that interpretation remains uncertain.

PVARA has indicated that it will continue to consult with scholars, regulators, and industry participants to develop a nuanced approach. The authority is expected to issue further guidance on how licensed VASPs can operate in a manner consistent with Islamic law. This could include requirements for asset backing, transparency, and risk disclosure.

The coming months will be crucial for Pakistan's crypto ecosystem. The successful integration of Sharia compliance could unlock significant demand from the country's Muslim population, while a failure to do so could push the industry underground. The PVARA chairman's call for continued dialogue suggests that regulators are aware of the stakes and are committed to finding a path forward.

Meanwhile, the global crypto market continues to evolve. Bitcoin and other major cryptocurrencies have seen increased adoption in various parts of the world, and the trend toward tokenization of assets is gaining momentum. Pakistan's ability to navigate these developments while respecting its religious and cultural context will be closely watched by other nations facing similar challenges.

The meeting between Bilal bin Saqib and Mufti Taqi Usmani represents a significant step toward bridging the gap between technology and tradition. While the ruling against crypto purchases is a setback for proponents of digital currencies in Pakistan, the door remains open for further discussion. As Saqib noted, digital assets are not a monolith, and each category requires its own assessment. With continued dialogue and careful regulation, Pakistan may yet find a way to participate in the digital economy without compromising its Islamic values.

Source:Cointelegraph News