An Islamic cleric in Pakistan has issued a fatwa declaring cryptocurrency trading haram (forbidden) under Sharia law. Mufti Muhammad Taqi Usmani last week said trading in cryptocurrencies, including stablecoins, is not permissible under Sharia, arguing that such assets do not meet the Islamic definition of wealth or property.

Usmani said terms such as cryptocurrency, virtual currency, token and stablecoin all refer to the same category of digital assets, adding that changing the terminology does not alter their religious status under Sharia law.

Usmani chairs the Shariah Board of the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), whose standards are followed by more than 200 Islamic financial institutions globally.

Are religious investors selling crypto holdings after the fatwa?

While a fatwa is a religious opinion and not law, market participants were quick to notice signs of panic selling. This led to pockets of sell-off as some religious investors in key markets like Pakistan, India and the UAE quickly dumped their digital holdings.

Notably, Pakistan itself is ranked among the world's largest crypto markets by retail activity. Binance, the world’s largest crypto exchange, has nearly 70 lakh users in Pakistan, the world’s third largest crypto market worth $1.5 billion, according to Chainalysis. India’s crypto market is estimated at around $2.5 billion, while the UAE is at about $1.5 billion, people told ET Tech.

“This is the first time that a scholar of Mufti Usmani's stature has issued a religious ruling calling crypto trading illegitimate…This has already triggered debate and consultation among governments in many regions,” said Kashif Raza, founder of crypto education platform Bitinning.

Also read: Pakistan cleric’s fatwa sparks multi-market crypto panic

Obstacle to Pakistan’s crypto ambitions

The latest development comes while the Pakistani government aims to accelerate crypto trading, hoping to become a regional crypto hub. In April 2025, World Liberty Financial, the decentralised finance platform majority-owned by the Trump family, signed a letter of intent with the Pakistan Crypto Council to promote blockchain adoption in the country. The council, advised by former Binance chief Changpeng Zhao, has outlined plans to position Pakistan as the "crypto capital of South Asia," competing with regional markets such as the UAE.

Meanwhile, Pakistan's virtual assets regulator has asked the country's top Islamic seminary to draw a distinction between speculative cryptocurrencies and asset-backed digital tokens, its chief said on Wednesday. "The central question the fatwa raises is whether a digital asset constitutes recognised wealth under Shariah (Islamic law). That is precisely the right question, and it is why these instruments must be examined individually," said Bilal bin ‌Saqib, chairman of the Pakistan Virtual Assets Regulatory Authority (PVARA). "Pakistan has the opportunity to lead the world in Shariah-compliant digital finance, and that leadership must be built with our scholars,” he added.

Bitcoin was trading marginally lower at $64,555 on Thursday morning. Ether was down around 1%. The cryptocurrencies however have gained over 4% and nearly 11% respectively in one week.

Also read: Thinking of entering the cryptocurrency market? Here’s an investment, trading guide for you

(With inputs from agencies)

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