Pakistan's virtual assets regulator is pushing for a more nuanced religious stance on digital currencies, after a ruling from the country's most influential Islamic seminary threatened to derail the government's digital asset ambitions. The regulator has formally asked the seminary to clarify the difference between speculative cryptocurrencies and asset-backed digital tokens, hoping to avoid a blanket ban that could stall the sector.
The seminary's ruling
Earlier this month, the seminary issued a fatwa declaring that trading in cryptocurrencies is un-Islamic. The ruling was broad, and the regulator worries it could be interpreted to cover all digital tokens — including asset-backed ones that might comply with Islamic finance principles. That would be a major setback for Pakistan's plans to launch a central bank digital currency and to attract blockchain investment.
Regulator's response
The regulator didn't challenge the fatwa outright. Instead, it asked the seminary to draw a line between purely speculative crypto assets — the kind used for gambling-like trading — and tokens that represent real assets like gold, real estate, or trade finance. The idea is to carve out room for Sharia-compliant digital finance without picking a fight with religious authorities.
The timing isn't great. Pakistan has been working on a regulatory framework for digital assets since 2024, and the central bank has been piloting a digital rupee. A total ban on asset-backed tokens would kill those efforts.
What's at stake
If the seminary doesn't clarify its position, the regulator could face a de facto ban on all digital tokens — even those designed to follow Islamic law. That would leave Pakistan's crypto sector in legal limbo and scare off foreign investors who were eyeing the country's young, mobile-first population.
The regulator is essentially buying time. It wants the seminary to issue a supplementary ruling that distinguishes between haram speculation and halal asset-backed tokens. Whether the seminary will oblige is an open question.
No date has been set for the seminary's response. But the regulator's request is now on the record, and the ball is in the clerics' court.
