Daily Vecsignal - Islamic Scholars Outlaw Crypto

Islamic Scholars Outlaw Crypto

July 16, 2026 | VECS News

Prominent Islamic scholars in Pakistan have officially declared the trading of cryptocurrencies to be haram or strictly forbidden under Islamic law. The collective ruling issued by leading religious authorities including the Jamia Darul Uloom Karachi states that digital currencies like Bitcoin and Ethereum do not comply with Shariah principles. The scholars emphasized that because cryptocurrencies are not backed by any physical assets or recognized by any state authority they lack intrinsic value. This formal religious decree carries immense weight in Pakistan where religious edicts heavily influence the financial behavior of a significant portion of the population.

This religious prohibition is deeply rooted in the foundational principles of Islamic commercial jurisprudence which explicitly prohibit excessive uncertainty known as gharar and speculative gambling known as maisir. According to the scholarly consensus the extreme volatility of cryptocurrency markets transforms trading into a game of chance rather than a legitimate economic activity. Furthermore Islamic finance requires that an asset have a tangible underlying value or be tied to a real-world enterprise. The scholars concluded that the decentralized and anonymous nature of crypto assets makes them fundamentally incompatible with these strict ethical and financial mandates.

The immediate impact on investment instruments particularly within the digital asset sector is expected to be highly disruptive across the Muslim world. In Pakistan retail investors who previously engaged in digital asset trading now face a profound moral and religious dilemma likely triggering a localized sell-off and a withdrawal of capital from centralized exchanges. On a broader scale this ruling threatens the growth of Islamic crypto platforms and exchange-traded funds that have been attempting to bridge the gap between decentralized finance and Shariah-compliant investing. Institutional investors operating in Islamic finance hubs may also reconsider their exposure to digital assets to avoid violating religious compliance standards.

Global experts in Islamic finance have largely supported the theological rationale behind this declaration while noting its complexity. Dr. Mohammad Daud Bakar a highly respected Shariah scholar and founder of Amanie Advisors stated that the burden of proof lies entirely on the crypto industry to demonstrate tangible utility. Bakar noted that while the underlying blockchain technology is universally recognized as beneficial unbacked digital tokens fail the basic test of being a medium of exchange or a store of value in Islamic law. His perspective aligns with the Accounting and Auditing Organization for Islamic Financial Institutions which has historically maintained a cautious stance on digital currencies.

Conversely digital asset market analysts view this development through a more pragmatic lens focusing on market fragmentation rather than religious theology. Kim Grauer the director of research at Chainalysis pointed out that religious prohibitions rarely eliminate demand but rather push trading activities into unregulated peer-to-peer networks. Grauer emphasized that historical data shows similar fatwas in other regions merely shifted crypto trading from centralized compliant platforms to decentralized exchanges where monitoring is virtually impossible. She argued that driving the market underground increases the risks of fraud and financial crime for everyday investors.

Pakistan’s religious ruling highlights a growing divergence in how Muslim-majority nations approach digital asset regulation and religious compliance. While Pakistan and Indonesia have seen their top religious authorities issue strict prohibitions against cryptocurrencies other nations have taken a radically different approach. The United Arab Emirates and Bahrain have actively embraced digital assets by establishing comprehensive regulatory frameworks that include specific licenses for Shariah-compliant crypto exchanges. This regulatory fragmentation creates a paradox where a digital asset is considered legally valid and religiously permissible in Dubai but completely forbidden in neighboring Islamic countries.

Ultimately the classification of cryptocurrency as haram by Pakistan’s leading scholars establishes a significant ideological boundary for the global digital asset market. It forces the cryptocurrency industry to confront the reality that technological innovation alone is insufficient to guarantee universal adoption. If digital asset proponents wish to access the vast capital reserves of the Islamic finance sector they will need to develop asset-backed tokens that explicitly satisfy the rigorous requirements of Shariah law. Until such structural changes occur the religious divide over cryptocurrency will remain a defining challenge for global investment markets.