By Muhammad Zakwan Hazarvi, Senior Associate & Shariah Advisory Lead, Esquare Legal
The idea of currency in Islam depends on real value, stability, and ethical exchange. In the early Islamic economic system, gold, silver, dinar, and dirham were not merely mediums of trade but representations of intrinsic value, fairness, and trust. Islamic financial principles emphasised the prohibition of interest, excessive uncertainty, and unjust enrichment, ensuring that currency functioned as a facilitator of real economic activity rather than speculative gain.
As the global financial system evolved, fiat currency replaced commodity-based money. This introduced challenges: inflationary pressures, debt-based growth models, and financial instruments that often conflict with Shariah principles. In response, Islamic finance emerged as an innovative discipline, aiming to provide modern solutions for modern problems through ethical and faith-based guidelines, through instruments like Musharakah, Mudarabah, and many others.
Now the world is entering a new financial era with the rise of digital assets and cryptocurrencies. Blockchain-based currencies have brought challenges that question the traditional definitions of money by introducing decentralisation, transparency, and borderless transactions. For Islamic finance, this presents both an opportunity and a complex juristic challenge.
The Juristic Question
The purely traditional framework may not be sufficient to address the complexities of digital economies. Instead, the approach that scholars have adopted in every other evolving matter of human life needs to be maintained here as well: preserve the core objectives of Islam and of public welfare, while understanding the technological and economic realities of modern financial systems.
The future of Shariah finance will not be shaped by rulings alone, but by how deeply those issuing them understand the underlying technologies and mechanisms. As money itself changes form, the question is not merely whether we are adapting Islamic finance to new tools, but whether we are rethinking the very way we define financial ethics in a digital world.
What Makes a Crypto Product Shariah-Compliant?
The principal Shariah constraints on any financial product are riba (interest in the conventional lending or yield sense), gharar (excessive uncertainty or speculation), maysir (gambling-like risk), and haram underlying activity. Interest-bearing yield products, high-leverage derivatives, and prediction markets typically face unfavourable Shariah analysis.
Asset-backed tokens, where the underlying asset is Shariah-permissible — gold, commodities, halal equities, real estate — are generally most tractable. Shariah-compliant stablecoins backed by permissible reserves are feasible. Equity-style tokenized profit-sharing structures designed on musharaka principles are viable. Products that avoid the prohibited elements and are backed by real economic activity form the core of the Shariah-compliant crypto product universe.
The Commercial Case
The global Islamic finance market is approximately USD 4 trillion in assets under management. Saudi Arabia, the UAE, Malaysia, and Indonesia account for the majority of institutional allocation. Pakistan has one of the world’s largest active crypto user bases — and one of the most significant Muslim retail investor populations globally. Operators with credible Shariah-compliant products access markets that competitors with conventional-only products cannot directly reach.
PVARA — Pakistan’s dedicated virtual asset regulator — has a Shariah Advisory Committee as a statutory component of its regulatory structure. Any product marketed to Pakistani investors as Shariah-compliant requires formal endorsement through the PVARA framework. This is not optional compliance: it is a legal requirement.
How Esquare Legal Approaches Shariah Advisory
Esquare Legal operates a two-product Shariah advisory model. A Shariah Compliance Structuring Report provides a technical analysis of the product’s compliance with Shariah principles — covering riba, gharar, maysir, and halal asset backing — signed by myself and Safi Ghauri. For institutional requirements, a full Shariah Opinion Letter co-signed by a qualified Mufti provides the formal fatwa-equivalent opinion required for institutional Islamic finance compliance.
If you are building a crypto product targeting the Gulf, Pakistani, or Southeast Asian Islamic finance market, the Shariah structuring question is not a last-mile compliance issue — it is a first-design architecture question. Learn more about our Shariah advisory practice, or contact us to discuss your product.
Muhammad Zakwan Hazarvi is a Senior Associate and Shariah Advisory Lead at Esquare Legal, with training in Islamic jurisprudence and deep expertise in the intersection of Shariah compliance and blockchain-based financial products.