The Thesis
Pakistan has roughly 40 million cryptocurrency users, an estimated US$300 billion in annual crypto transaction volume, and a global ranking of third in the Chainalysis Crypto Adoption Index — behind only India and the United States. Earlier this year, it passed the Virtual Assets Act 2026, which created PVARA, the Pakistan Virtual Assets Regulatory Authority, complete with a built-in Shariah Advisory Committee. The government was, in effect, building a Sharia-compliant regulatory framework for digital assets. Then Darul Uloom Karachi — home to Pakistan’s most senior Islamic scholars — issued a fatwa declaring all of it impermissible. What this moment reveals is not a crisis. It is a structural fault line that the entire Islamic fintech sector needs to understand.
The Ruling
The fatwa, signed by Mufti Muhammad Taqi Usmani and five other scholars, carries the date 24 Zilhaj 1447 AH — corresponding to June 10, 2026. It circulated online and entered mainstream coverage beginning July 9, 2026.
The ruling is categorical. Bitcoin, Ethereum, and USDT are each explicitly named. The scope clause extends to all blockchain-based tokens and stablecoins. Changing the label — from “cryptocurrency” to “virtual currency,” “token,” or “digital asset” — does not alter the religious status. The core doctrinal finding: cryptocurrency does not qualify as “maal” (wealth or property) under Sharia, because it lacks the intrinsic value, physical backing, or state recognition required by classical Hanafi fiqh. The fatwa describes crypto as “the recording of fictitious numbers in an account.”
The practical implications, as set out in the ruling itself, are severe. A transaction already completed in crypto is invalid — ownership of the purchased goods was never lawfully established. Individuals were advised to return items bought with crypto and to permanently delete any courses purchased digitally. There is no grace period and no conversion mechanism. The ruling does not acknowledge any distinction between crypto as a speculative asset and crypto as a payment rail.
The State’s Position — and the Gap
What makes this moment particularly significant is the institutional contradiction it creates. Pakistan’s Virtual Assets Act 2026 was passed in February and March by the Senate and National Assembly respectively and signed into law by President Asif Ali Zardari. It created PVARA with an explicit mandate to develop Shariah-compliant crypto frameworks — Pakistan was described by multiple international commentators as “one of the first countries to formally integrate Islamic finance principles into crypto regulation.”
PVARA Chairman Bilal Bin Saqib met Mufti Taqi Usmani on July 11, two days after the fatwa became public. He described the meeting as “constructive” and called for a wider technical and Sharia assessment of digital assets, noting that “blockchain, digital assets, stablecoins, and tokenized real-world assets represent a broad spectrum of technologies and use cases.” His ask: evaluate them as distinct categories, not as a single class. After the meeting, Mufti Usmani issued no revised ruling.
The Fiqh Divide Is Real
Pakistan is not alone. Egypt’s Darul Ifta’, Kuwait’s Fatwa Council, Turkey’s Fatwa Council, and Saudi Arabia’s Fatwa Council have all issued rulings against cryptocurrency. Qatar’s Sheikh Ali Qaradaghi, Secretary-General of the International Union of Muslim Scholars, is among scholars who consider it impermissible.
The permissibility camp is equally credible. Malaysia’s Islamic advisory bodies take a conditional approach — crypto can be permissible depending on use case and volatility. Indonesia’s MUI (Majelis Ulama Indonesia) has ruled crypto permissible as a commodity for trading but not as currency. Prominent Malaysian Sharia scholars including Dr. Mohd Daud Bakar and Dr. Zaharuddin Abd Rahman hold conditional positions.
The divide is doctrinal, not cosmetic. It turns on whether “maal” requires physical backing or state endorsement, or whether widespread social acceptance and transactability are sufficient. Both positions have classical grounding. Neither is going away.
What to Watch
PVARA’s Shariah Advisory Committee is now the most important institution to watch. If it produces a nuanced ruling that distinguishes blockchain infrastructure from speculative tokens — and if that ruling earns scholarly endorsement — there is a path forward. If it cannot secure the credibility of bodies like Darul Uloom Karachi, Pakistan’s 40 million crypto users will operate in a permanent state of religious ambiguity.
The deeper question for the Islamic fintech sector: is a Sharia-compliant crypto regulatory framework possible, or is the asset class itself the problem? The answer will determine whether Islamic digital finance can engage with blockchain infrastructure at all — or whether it will have to build entirely parallel systems.