A working note on the Lahore High Court’s order (Multan Bench, Tariq Saleem Sheikh J) in Hammad Ali and others v. The State (30 April 2026), one of the fullest judicial treatments to date of the legal and regulatory status of cryptocurrency in Pakistan. Deciding a pre-arrest bail application arising from an FIA cyber-crime FIR over peer-to-peer (P2P) USDT dealing, and with the benefit of written responses from all three relevant regulators — PVARA, the State Bank and the SECP — the Court examined whether virtual assets are “currency”, a “commodity” or a “security”, and whether the receipt of rupee payments in P2P trading discloses any offence. The full note is attached as a PDF; the essentials are below.

Background

The complainant said he had invested an aggregate of 270,000 USDT (Tether) — raised by liquidating his home, gold, vehicles and business assets — through multiple P2P merchants, paying Pakistani rupees from his bank accounts into theirs in exchange for USDT credited to his trading account, which the platform then froze. The FIA traced 351 transactions across 237 bank accounts totalling some Rs.68.6 million and registered FIR No. 90/2025 under sections 419, 420, 468 and 471 PPC and sections 13 and 14 of PECA 2016. The attribution to the three petitioners was confined to a handful of specified bank receipts relating to 2021–2023. They sought confirmation of their ad-interim pre-arrest bail.

What the Court held

• USDT is a “virtual asset”, not money. Drawing on the FATF’s 2021 Updated Guidance, the Court characterised USDT as a digital representation of value used for payment or investment — a privately issued, fiat-referenced stablecoin — and not fiat currency, legal tender or a monetary instrument. The legal character of a virtual asset is not fixed; it depends on the function it performs and on the statute under which classification arises.
• The 2018 SBP Circular was regulatory, not penal. BPRD Circular No. 03 of 2018 was addressed to regulated financial and payment-sector entities, not to private individuals, and describing virtual currencies/tokens as “not legal tender” did not make them illegal or contraband. It did not convert private P2P dealing into a criminal offence — as the SBP’s own clarification of 30 May 2025 confirms.
• No retrospective effect of the new framework. The Virtual Assets Ordinance 2025 and the Virtual Assets Act 2026 establish a comprehensive regime and create PVARA, but do not retrospectively determine criminal liability for transactions predating them.
• Not “currency” or “foreign exchange” under FERA. USDT does not fall within the enumerated categories of section 2(b) of the Foreign Exchange Regulation Act 1947, and does not become foreign currency merely because it is traded internationally, nor foreign exchange merely because its value is pegged to a foreign currency. The Court drew support from the Indian Supreme Court’s decision in Internet and Mobile Association of India v. Reserve Bank of India, noting that Pakistan’s FERA — unlike India’s FEMA — has no residuary “other similar instruments” mechanism.
• FERA is preserved where a genuine nexus exists. FERA may still apply where the surrounding arrangement supplies a foreign-exchange nexus — a prohibited or regulated payment, conversion into or out of foreign currency, a remittance to a person resident outside Pakistan, or a device to evade the Act — with liability arising from that component rather than from the use of a virtual asset. No such nexus was shown here.
• None of the FIR offences was prima facie made out. No personation (section 419 PPC); no dishonest inducement at inception (section 420 PPC, in any event bailable); no forged document or electronic record identified (sections 468 and 471 PPC); and no unauthentic data or intent for wrongful gain under sections 13 and 14 PECA. The mere fact that a transaction was carried out on an online platform, or that virtual assets were transferred digitally, does not by itself establish electronic forgery or fraud against every recipient of funds.
• Criminal liability remains individual. That the transactions formed part of a wider pattern did not displace the need to establish each account holder’s role; the receipts attributed to the petitioners were consistent with routine P2P merchant activity, and the case rested on documentary and electronic records already available, so no custodial interrogation was warranted.

The application was allowed and the ad-interim pre-arrest bail confirmed on fresh bail bonds of Rs.1,000,000 each. The Court was careful to record that its observations are tentative and confined to the bail application, and that they do not exclude the application of any other law — including anti-money laundering, taxation or banking law — where its ingredients are established on independent material. The order should not, therefore, be read as a general immunity for virtual-asset dealing, but its classification analysis is likely to be cited in future proceedings.