Crypto is 'haram': Top Pakistani cleric Mufti Taqi Usmani's fatwa triggers sell-off as regulator seeks clarification

The Pakistan Virtual Assets Regulatory Authority (PVARA), the country's cryptocurrency regulator, has asked a leading Islamic seminary to clarify the religious status of different types of digital assets after a prominent Islamic scholar declared trading in cryptocurrencies such as Bitcoin, Ethereum and stablecoins to be "haram" (forbidden) under Sharia law, according to Reuters.

Bilal bin Saqib, chairman of PVARA, said the regulator requested clarification after Mufti Muhammad Taqi Usmani, one of the Muslim world's most influential Islamic clerics, ruled that cryptocurrency transactions are not permissible under Islamic principles, as per the report.

The request follows a religious ruling issued by the Jamia Darul Uloom Karachi seminary in June, stating that cryptocurrencies do not currently qualify as wealth under Islamic law and therefore cannot be considered a legitimate medium of exchange or payment.

The declaration has sent shockwaves through Pakistan and ignited intense debates among Muslim investors globally.

What is a fatwa?

A fatwa is a formal, non-binding religious opinion delivered by a qualified Islamic scholar interpreting Sharia law. While it is not a legally enforceable statute, a fatwa carries immense moral and social weight when issued by a highly respected figure. In Pakistan, Mufti Usmani's rulings command unparalleled authority. As an internationally recognised expert in Islamic finance and a senior scholar at Karachi's prestigious Darul Uloom seminary, his views shape the financial behaviour of millions of devout followers worldwide.

The core of the religious ruling hinges on the idea that cryptocurrencies fail to meet Islamic standards for legitimate property or wealth. The fatwa argues that virtual assets are plagued by excessive uncertainty (gharar) and speculative trading that mirrors gambling (maysir). Under Sharia principles, financial activities are forbidden if they involve interest (riba), lack real-world intrinsic value, or rely on extreme speculation. Because most crypto tokens and stablecoins fall into these categories, the cleric ruled them impermissible for Muslim traders.

Clash of timing and progress

This spiritual roadblock comes at an incredibly inconvenient time for the Pakistani government. Over the past 12 months, Islamabad has worked hard to establish itself as a forward-thinking digital market. Efforts included creating the Pakistan Crypto Council, launching the Pakistan Virtual Assets Regulatory Authority, and drafting progressive rules for virtual assets. These initiatives aimed to leverage blockchain to attract foreign investment and modernise the local financial ecosystem.

While the state’s legal framework remains completely separate from religious decrees—meaning crypto trading is still legally permitted—the cultural impact is undeniable. Because of the cleric's stature, a vast number of faith-driven investors are expected to voluntarily walk away from their digital portfolios.

Market fallout

The ruling sparked sudden sell-offs among religious investors across Pakistan, India, and the UAE, forcing some startups to brace for wider regional impacts.

Indeed, reports indicate that immediately following the announcement, many retail investors began liquidating their holdings. Crypto startups have warned that if other global Islamic bodies mirror Usmani’s stance, the selling pressure could easily spread to broader Muslim-majority nations. However, the international crypto market has remained largely stable, unaffected by the localised panic.

This tension highlights a deeper economic dilemma. Pakistan relies heavily on foreign remittances from its massive diaspora. Proponents of digital assets argue that instead of outright bans, robust government regulation is the only logical path forward. They believe frameworks are essential to prevent financial fraud and protect retail consumers, while still harnessing blockchain technology to boost financial inclusion and modernise transaction pipelines.

Ultimately, Mufti Usmani’s global reputation means this fatwa is more than just a domestic issue. Its ripple effects could alter investor behaviour across the Middle East and Southeast Asia, especially if other prominent religious institutions decide to align with his conservative stance.