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Pakistan Regulator Calls for Separate Shariah Review After Islamic Scholar Declares Crypto Purchases Impermissible
Pakistan’s newly established virtual‑asset regulator, the Pakistan Virtual Assets Regulatory Authority (PVARA), has announced that it will pursue a more nuanced review of digital assets in light of a recent fatwa issued by Islamic scholar Mufti Taqi Usmani.
On July 11, 2026, PVARA Chairman Bilal bin Saqib met with Usmani, who had signed a fatwa on June 10 that categorises purchases made with cryptocurrency—including stablecoins such as USDT—as impermissible under Islamic law. The ruling states that digital tokens do not qualify as recognised property or wealth, describing them instead as “mere recording of fictitious numbers in an account.”
Saqib said the regulator would not adopt a blanket prohibition. Instead, he called for “careful technical assessment alongside rigorous Shariah examination” of distinct categories of digital assets, such as blockchain infrastructure, stablecoins, tokenised real‑world assets, and other tokenised products. The statement was made in a public briefing that also highlighted PVARA’s ongoing licensing process.
The Virtual Assets Act of 2026, which created PVARA, permits the regulator to issue licences to exchanges, custodians, brokers, token issuers and other virtual‑asset service providers (VASPs). In April, the State Bank of Pakistan (SBP) released a circular allowing banks to open accounts for firms licensed by PVARA, provided they verify licences, conduct due diligence, segregate customer funds and report suspicious activity to the Financial Monitoring Unit.
The SBP circular also clarified that banks cannot use their own capital or customer deposits to trade or hold virtual assets, a restriction that lifted an eight‑year ban on banking services for regulated crypto firms.
PVARA has been working on draft operating standards and a public consultation on rules covering the ten licence categories identified in the draft regulations. The regulator has not announced any changes to the licensing framework following the meeting with Usmani.
In parallel, the Pakistani government has pursued international partnerships to explore tokenisation and stablecoin use. In December 2025, a non‑binding agreement was signed with Binance to study the tokenisation of up to US$2 billion in state assets, including government bonds, Treasury bills and commodity reserves. A January 2026 agreement involved the USD1 stablecoin for cross‑border payments, with the finance ministry and SBP slated to conduct technical reviews.
These projects remain subject to regulatory approval and technical scrutiny. PVARA has stated that any tokenised or stablecoin initiative must comply with the Virtual Assets Act, the SBP’s banking rules, and anti‑money‑laundering and counter‑terrorism financing requirements.
The fatwa issued by Usmani and his colleagues has added a religious dimension to Pakistan’s regulatory landscape. While the ruling does not alter the legal status of digital assets under the Virtual Assets Act, it signals that Shariah compliance will be a key consideration for firms operating in Pakistan.
PVARA’s chairman emphasized that the regulator’s goal is to protect Pakistani consumers from fraud, exploitation and financial harm. He said that engaging scholars, regulators and industry specialists will help ensure that digital‑asset products are both technically sound and compliant with Islamic principles.
At present, licensed VASPs continue to operate under the existing framework. The regulator is expected to release final operating standards later in 2026, and the SBP is monitoring the implementation of banking access rules. The outcome of the stablecoin and tokenisation studies will likely influence future regulatory guidance.
In summary, Pakistan’s virtual‑asset regulator is pursuing a differentiated approach to digital assets, separating technical assessment from Shariah review, while maintaining its licensing and banking access regime. The regulatory process will continue to evolve as the government explores stablecoin and tokenisation projects and as the regulator finalises its operating standards.
On July 11, 2026, PVARA Chairman Bilal bin Saqib met with Usmani, who had signed a fatwa on June 10 that categorises purchases made with cryptocurrency—including stablecoins such as USDT—as impermissible under Islamic law. The ruling states that digital tokens do not qualify as recognised property or wealth, describing them instead as “mere recording of fictitious numbers in an account.”
Saqib said the regulator would not adopt a blanket prohibition. Instead, he called for “careful technical assessment alongside rigorous Shariah examination” of distinct categories of digital assets, such as blockchain infrastructure, stablecoins, tokenised real‑world assets, and other tokenised products. The statement was made in a public briefing that also highlighted PVARA’s ongoing licensing process.
The Virtual Assets Act of 2026, which created PVARA, permits the regulator to issue licences to exchanges, custodians, brokers, token issuers and other virtual‑asset service providers (VASPs). In April, the State Bank of Pakistan (SBP) released a circular allowing banks to open accounts for firms licensed by PVARA, provided they verify licences, conduct due diligence, segregate customer funds and report suspicious activity to the Financial Monitoring Unit.
The SBP circular also clarified that banks cannot use their own capital or customer deposits to trade or hold virtual assets, a restriction that lifted an eight‑year ban on banking services for regulated crypto firms.
PVARA has been working on draft operating standards and a public consultation on rules covering the ten licence categories identified in the draft regulations. The regulator has not announced any changes to the licensing framework following the meeting with Usmani.
In parallel, the Pakistani government has pursued international partnerships to explore tokenisation and stablecoin use. In December 2025, a non‑binding agreement was signed with Binance to study the tokenisation of up to US$2 billion in state assets, including government bonds, Treasury bills and commodity reserves. A January 2026 agreement involved the USD1 stablecoin for cross‑border payments, with the finance ministry and SBP slated to conduct technical reviews.
These projects remain subject to regulatory approval and technical scrutiny. PVARA has stated that any tokenised or stablecoin initiative must comply with the Virtual Assets Act, the SBP’s banking rules, and anti‑money‑laundering and counter‑terrorism financing requirements.
The fatwa issued by Usmani and his colleagues has added a religious dimension to Pakistan’s regulatory landscape. While the ruling does not alter the legal status of digital assets under the Virtual Assets Act, it signals that Shariah compliance will be a key consideration for firms operating in Pakistan.
PVARA’s chairman emphasized that the regulator’s goal is to protect Pakistani consumers from fraud, exploitation and financial harm. He said that engaging scholars, regulators and industry specialists will help ensure that digital‑asset products are both technically sound and compliant with Islamic principles.
At present, licensed VASPs continue to operate under the existing framework. The regulator is expected to release final operating standards later in 2026, and the SBP is monitoring the implementation of banking access rules. The outcome of the stablecoin and tokenisation studies will likely influence future regulatory guidance.
In summary, Pakistan’s virtual‑asset regulator is pursuing a differentiated approach to digital assets, separating technical assessment from Shariah review, while maintaining its licensing and banking access regime. The regulatory process will continue to evolve as the government explores stablecoin and tokenisation projects and as the regulator finalises its operating standards.
