Pakistan's Virtual Assets Regulatory Authority (PVARA) challenged a June ruling by Jamia Darul Uloom Karachi, one of the country's most influential Islamic seminaries, which declared cryptocurrency-based purchases unlawful under Islamic law. PVARA Chairman Bilal bin Saqib sought clarification on the distinction between speculative cryptocurrencies and asset-backed digital tokens after the fatwa raised uncertainty over the government's plans to formalize a market serving more than 240 million people. The ruling triggered internal disagreements within the seminary, with some clerics arguing that asset-backed tokens or fully reserved stablecoins may meet Shariah standards, while others maintain cryptocurrency remains too speculative for lawful trade. JS Global Capital's Waqas Ghani warned the fatwa could hinder broader bank-led cryptocurrency adoption beyond Pakistan's urban trading community, though trading volumes have not yet been affected. Pakistan ranks among the world's largest retail cryptocurrency hubs, and the regulatory authority is now working with scholars to define at least two safe categories of asset-backed digital tokens as part of a national digital-asset framework.
Islamic Scholars Disagree on Shariah Compliance of Asset-Backed Tokens
Jamia Darul Uloom Karachi issued the fatwa last month in response to an inquiry about paying for books and an online course with cryptocurrency. The ruling was signed by several scholars, including Mufti Muhammad Taqi Usmani, a leading authority in Islamic finance. According to Bloomberg, clerics involved in drafting the fatwa differ on whether certain digital assets qualify as wealth under Shariah. Some scholars argue that asset-backed tokens or fully reserved stablecoins may be permissible, while others maintain that cryptocurrency remains too speculative to meet Islamic standards for lawful trade. Bloomberg reported that some clerics believe further study is needed before issuing a definitive position on newer instruments, such as tokenized sukuk (Islamic bonds) or gold-backed tokens. The internal debate has added pressure on regulators seeking religious consensus as they build a national digital-asset framework. Waqas Ghani, head of research at JS Global Capital, said in a Reuters report that the fatwa could hinder broader, bank-led cryptocurrency adoption beyond Pakistan's urban trading community, though he noted that trading volumes have not yet been affected.
PVARA Distinguishes Blockchain-Recorded Assets from Speculative Tokens
Bilal bin Saqib said PVARA is working with scholars to evaluate digital assets by category rather than treating them as a single class. The key question, he said, is whether a digital asset qualifies as recognized wealth under Shariah. Saqib said a blockchain-recorded sukuk represents ownership of a real, income-generating asset, while gold-backed tokens and fully reserved stablecoins carry enforceable claims on tangible, redeemable value. Blockchain, he added, is "a record-keeping and verification technology, not a financial asset." Speculative tokens with no underlying asset are a separate matter, and Saqib said scholars' concerns "must be taken seriously." Saqib stated: "We will continue working closely with our scholars as Pakistan develops its licensing framework and advances work on stablecoins and real-world asset tokenization. Pakistan has the opportunity to lead the world in Shariah-compliant digital finance, and that leadership must be built with our scholars."
FAQ
What did Pakistan's crypto regulator do after the June Islamic ruling?
PVARA Chairman Bilal bin Saqib sought clarification from Jamia Darul Uloom Karachi on the distinction between speculative cryptocurrencies and asset-backed digital tokens. The authority is working with scholars to define at least two safe categories of asset-backed digital tokens.
Why did the Islamic seminary issue a fatwa against cryptocurrency?
Jamia Darul Uloom Karachi issued the fatwa last month in response to an inquiry about paying for books and an online course with cryptocurrency. Scholars, including Mufti Muhammad Taqi Usmani, ruled that cryptocurrency-based purchases are not permissible under Islamic law.
How does PVARA distinguish different types of digital assets?
PVARA Chairman Bilal bin Saqib said blockchain-recorded sukuk represents ownership of a real, income-generating asset, while gold-backed tokens and fully reserved stablecoins carry enforceable claims on tangible, redeemable value. He stated that speculative tokens with no underlying asset are a separate matter and scholars' concerns must be taken seriously.
