Mufti Muhammad Taqi Usmani, president of Wifaq-ul-Madaris Al-Arabia Pakistan and head of Darul Uloom Karachi, issued a formal fatwa on June 10, 2026, declaring Bitcoin, Ethereum, all crypto tokens, and stablecoins including USDT to be religiously prohibited. The ruling, signed by six Islamic scholars including Usmani's son Hassan Usmani, came just months after Pakistan passed the Virtual Assets Act 2026 and lifted a seven-year banking ban on crypto services.

That seven-year ban traces back to a 2018 State Bank of Pakistan restriction that barred financial institutions from dealing in digital assets. Even under that prohibition, grassroots adoption surged, driven by remittance flows, rupee-inflation hedging, and youth-led peer-to-peer trading. The Virtual Assets Act 2026 represented a decisive pivot: a formal acknowledgment that crypto had already taken deep root in the Pakistani economy and required a proper regulatory home.

The Legal Argument

The fatwa's core argument centers on the Islamic legal concept of maal, which translates roughly as property or wealth. The scholars concluded that digital assets do not qualify as maal under Islamic jurisprudence, describing them as "merely a record of notional numbers in an account." The ruling covered the full spectrum of digital assets. "Cryptocurrency is known by different names, including virtual currency, token, and stablecoin," the fatwa text stated. "In all these forms, cryptocurrency is not considered wealth."

The immediate context was a citizen asking whether it was permissible to buy books and an online course using USDT. The scholars ruled the transactions invalid and instructed the buyer to return the books and permanently delete the course files.

The fatwa is a religious opinion, not a statute, and carries no legal enforcement power in Pakistani courts. But Usmani is arguably the most authoritative living scholar on Islamic finance globally. His opinions shape Shariah-compliant banking, sukuk (Islamic bond) structuring, and halal finance practices across Malaysia, the Gulf states, Bangladesh, and Muslim diaspora communities worldwide. The social weight of such a ruling in a nation of more than 230 million Muslims can be as consequential as formal regulation.

Regulator Pushes Back

Bilal Bin Saqib, chairman of PVARA (Pakistan Virtual Assets Regulatory Authority), met with Usmani on approximately July 11, 2026, and called the meeting "constructive." Saqib argued that blockchain technology, digital assets, stablecoins, and tokenized real-world assets represent distinct categories that each require their own technical and Shariah-based assessments.

"We are united on one fundamental objective: protecting Pakistanis from fraud, exploitation, and financial harm," Saqib said following the meeting. He added that these asset categories "merit careful technical assessment alongside rigorous Shariah examination, rather than being viewed through a single lens." Saqib also called for "continuous dialogue between regulatory bodies, Islamic scholars, and industry professionals" as the framework continues to develop.

As of July 13, 2026, no revised or retracted fatwa has been issued. The original ruling remains in force as a religious opinion.

A Framework Built on Compliance, Now Questioned

The timing places Pakistan in an awkward position. Parliament passed the Virtual Assets Act 2026 earlier this year and PVARA began licensing major global exchanges, with Binance and HTX already receiving No Objection Certificates. The regulator also launched a Regulatory Sandbox in April 2026 that is actively onboarding crypto startups, illustrating how far the rollout had already progressed before the fatwa landed. The law itself requires a mandatory Shariah Advisory Committee, a provision meant to signal that the framework was built with Islamic compliance in mind. The fatwa suggests that committee has not yet secured the endorsement of the country's most prominent Islamic finance authority, exposing a structural gap in the framework's execution.

The stakes are significant. Pakistan ranked third globally in Chainalysis's 2025 crypto adoption index, up from ninth. Estimates put the number of Pakistani crypto users at between 20 and 40 million people, roughly 17 percent of the population. On-chain transaction volume reached approximately $25 billion in 2025, and crypto remittances accounted for around $10.5 billion in flows, representing approximately 35 percent of combined official and informal remittance flows.

That remittance figure matters in particular because USDT is explicitly named in the fatwa. Tether's stablecoin is a primary tool for low-cost cross-border transfers in South Asia, and religious uncertainty around its use could dampen adoption in one of its most active corridors, even without any legal change.

Regional and Global Ripple Effects

Islamic scholars globally are not unified on this question. Around 60 percent of Muslim-majority countries permit regulated crypto trading under Shariah-compliant frameworks as of 2026. Egypt's Grand Mufti and UK-based scholar Shaykh Haitham al-Haddad have reached similar conclusions to Usmani, citing excessive volatility and lack of intrinsic value.

The majority of contemporary Islamic finance scholars, however, lean toward permitting spot crypto trading on regulated markets on the grounds that it involves no interest (riba) mechanism and can function as a store of value.

Usmani's ruling may pressure jurisdictions that are building Shariah-compliant crypto frameworks, including the UAE, Bahrain, and Malaysia, to seek comparable endorsements from scholars of similar standing. Developers building stablecoin infrastructure or DeFi products for Muslim-majority markets should expect increased scrutiny and would benefit from early engagement with PVARA's Shariah Advisory Committee process, whose engagement with senior scholars appears, at minimum, incomplete.

Whether the regulator-scholar dialogue produces a more granular Shariah assessment of tokenized real-world assets, the category Saqib specifically flagged for separate review, may determine how much room the Virtual Assets Act ultimately has to operate.