Pakistan crypto fatwa on July 13 bans trading as scholar rules assets haram

Mufti Muhammad Taqi Usmani, a prominent Islamic scholar, issued a fatwa on July 13 through Darul Uloom Karachi declaring cryptocurrency trading haram, ruling that digital assets do not qualify as wealth, or maal, under Sharia.

"Cryptocurrency does not meet the criteria of wealth in Islamic jurisprudence because it lacks intrinsic value and is subject to extreme uncertainty," Usmani, president of Darul Uloom Karachi, said in the religious decree.

The ruling places Pakistan, one of the largest crypto-adopting nations in South Asia, under renewed regulatory scrutiny. The fatwa could influence other Islamic scholars globally to issue similar rulings, potentially triggering sell-offs among Pakistani crypto holders and reducing trading activity across the region.

The decree adds regulatory uncertainty for crypto adoption in Muslim-majority markets, home to an estimated 1.9 billion people. Pakistan's government has yet to formalize a comprehensive digital asset framework, and the fatwa may accelerate efforts to align any future regulation with Shariah principles.

The ruling from Darul Uloom Karachi, one of the country's most influential seminaries, carries significant weight in Pakistan, where Islamic jurisprudence shapes public and legal opinion on financial matters. Unlike regulatory actions by the U.S. Securities and Exchange Commission or the European Union's Markets in Crypto-Assets regulation, this fatwa operates through religious authority rather than statutory law, creating a distinct compliance risk for exchanges and traders operating in the country.

Pakistan ranked among the top 10 nations globally for crypto adoption in Chainalysis's 2024 Global Crypto Adoption Index, with an estimated $20 billion in digital asset transaction volume flowing through the country between mid-2023 and mid-2024. The fatwa could push a portion of that activity into informal peer-to-peer channels or prompt capital flight to jurisdictions with clearer Shariah-compliant frameworks, such as the United Arab Emirates, where regulators have developed a licensing regime for virtual asset service providers.

The State Bank of Pakistan and the Securities and Exchange Commission of Pakistan have not yet issued a formal response to the fatwa. The country's central bank previously barred banks from facilitating crypto transactions in 2018 but stopped short of an outright ban on individual ownership or trading.

This article is for informational purposes only and does not constitute investment advice.