A religious edict from Pakistan’s most influential Islamic finance scholar, Mufti Muhammad Taqi Usmani, declaring cryptocurrency transactions impermissible under Sharia law triggered a wave of retail selling across Pakistan, India and the UAE in early July. While localised panic caused some startups to warn of wider regional contagion, the international crypto market remained largely stable, underscoring the ruling’s primarily cultural rather than systemic financial impact.

The fatwa, issued by Karachi’s Jamia Darul Uloom seminary and endorsed by five other scholars, rests on the argument that digital assets lack intrinsic value and do not meet the Islamic definition of wealth (mal). It further cites excessive uncertainty (gharar) and speculation akin to gambling (maysir), concluding that Bitcoin, Ethereum and stablecoins are all haram. Though non-binding, such decrees carry immense moral weight in Pakistan, where over 20 million people are estimated to engage in crypto-related activities.

The ruling landed just as Islamabad accelerates its own crypto push. The Pakistan Virtual Assets Regulatory Authority (PVARA), established this year, is drafting licensing rules for exchanges and exploring tokenised sovereign assets. PVARA Chairman Bilal bin Saqib confirmed he has asked the seminary to distinguish between purely speculative tokens and digital instruments backed by tangible assets—such as gold-backed tokens or blockchain-recorded sukuk—arguing that a blanket prohibition risks derailing the country’s bid to become a hub for Shariah-compliant digital finance. Analysts in Karachi note that trading volumes have so far held up, but warn the edict could become a hurdle to broader, bank-led adoption beyond urban retail circles.

The Pakistani debate unfolds against a backdrop of accelerating regulatory formalisation elsewhere. In Dubai, Revolut received in-principle approval from the Virtual Assets Regulatory Authority to offer broker-dealer and exchange services, while Japan’s upper house passed a bill bringing crypto assets under the financial instruments law, raising maximum penalties for unregistered traders to ten years’ imprisonment. For Pakistan, the next milestone is the PVARA’s continued dialogue with religious scholars, with the first exchange licences expected in the coming months. Whether the seminary issues a nuanced clarification will shape not only domestic adoption but also the stance of other Islamic bodies watching from Muslim-majority markets.