The Shariah Advisory Committee and Islamic Virtual Assets

Pakistan’s Virtual Assets Act, 2026 uses the phrase “Shariah Advisory Committee” exactly once, in its definitions section. For a market where a large share of retail demand for virtual assets is shaped by whether a product is seen as Shariah compliant, that is a striking gap between expectation and text.

This matters commercially before it matters doctrinally. Any exchange, issuer or advisory business planning to market a product as “Shariah compliant” in Pakistan needs to know precisely what the Virtual Assets Act actually requires on this point, and what it merely gestures toward. The honest answer is that the operative detail has not yet been written.

What does the Act actually say about the Shariah Advisory Committee?

Section 3(1)(xxvii) defines the term in a single sentence: “‘Shariah Advisory Committee’ means the committee constituted by the Authority for advice on Shariah matters.” That is the entire statutory text on the Committee. There is no section establishing its composition, its powers, a duty to consult it before licensing, or a timetable for its formation.

A definition in a statute usually exists because the defined term is used elsewhere in an operative section. Here, having read the Act in full, we did not find a further operative section that names the Shariah Advisory Committee and imposes a duty tied to it. The definition stands alone. That is unusual, and worth noting rather than glossing over.

Where else does the Act reference Shariah compliance?

Only in the Statement of Objects and Reasons, the preamble text explaining why the legislation was introduced rather than an operative clause a court or the Pakistan Virtual Asset Regulatory Authority (“PVARA” or “the Authority”) could apply directly. It records that the corresponding legal framework is needed while:

“promoting innovation, financial inclusion, economic growth and development of Shariah complaint virtual asset services aligned with international standards.”

The Statement of Objects and Reasons explains legislative intent; it is background to interpretation, not a source of directly enforceable duties in the way a numbered section is. In practice, that means “development of Shariah compliant virtual asset services” describes a policy aspiration behind the Act, not a licensing condition an applicant must currently satisfy to obtain a PVARA licence.

Does the Authority have a general power to set the Committee up?

Yes, though it is a general power rather than one aimed specifically at Shariah matters. Section 9(2)(n) gives the Authority power to “constitute as many committees as deemed necessary to conduct its functions under this Act.” A Shariah Advisory Committee would fall within that general committee-forming power, but section 9(2)(n) does not itself require PVARA to form one, on what timeline, with what membership, or with what binding effect on licensing decisions.

Put plainly: the Act confirms the Authority can have a Shariah Advisory Committee, and defines the term so that later Regulations can use it without redefining it each time. It does not yet tell you what that Committee will do.

Where does Shariah consultation currently show up in practice?

The one concrete, operative reference we found across the three source documents reviewed for this piece sits in PVARA’s Sandbox Guidelines 2026, not in the Act itself. Under the Key Evaluation Criteria for sandbox applications, the Risk Management and Compliance heading lists:

“Consultation with Shariah advisors where applicable.”

This appears as one factor among several the Authority weighs when evaluating a sandbox applicant’s risk-management and compliance profile — alongside review of systemic, operational and ML/TF/PF risks, and evaluation of cybersecurity and data-protection frameworks. It is conditional (“where applicable”), it applies specifically to sandbox testing rather than full licensing, and it does not describe what “consultation” must involve, who qualifies as a Shariah advisor, or what outcome the Authority expects from that consultation.

What does this mean for a business marketing a “Shariah compliant” virtual asset?

Three things follow directly from the gap in the text.

• PVARA licensing is not, on the current text, a Shariah certification. Obtaining a No-Objection Certificate or a full licence under sections 19 to 21 of the Act says nothing about whether a product meets Shariah standards, because the licensing chapter does not reference the Shariah Advisory Committee at all.
• “Shariah compliant” marketing claims sit under the Act’s general conduct rules, not a bespoke Islamic-finance regime. Section 43 requires marketing materials to carry risk disclosures and comply with conditions the Authority may prescribe; nothing in the reviewed text singles out religious-compliance claims for additional scrutiny beyond that general standard.
• Reserve-backing rules already push some products toward structures that read as more conservative, without the Act framing this as Shariah compliance. Fiat-referenced tokens must maintain 100% reserve backing in high-quality liquid assets under section 31, and asset-referenced tokens must be fully backed by underlying assets under section 32. Full backing without leverage is a feature many Islamic-finance practitioners would recognise as consistent with prohibitions on speculative, unbacked instruments. Our reading is that this is a structural side-effect of the prudential rules, not evidence that the Act has built a Shariah-screening mechanism — that distinction matters and should not be blurred in marketing copy.

What should an applicant assume until Regulations are issued?

Assume the Shariah Advisory Committee is a future instrument, not a present one. Section 68 gives the Authority power to make Regulations, in consultation with the Division concerned, for carrying out the purposes of the Act, and it is Regulations of this kind — not the Act itself — that would logically define the Committee’s composition, its consultation triggers, and whether its advice becomes binding on a licensing decision.

A practical checklist for anyone building a product around a Shariah-compliance claim in the current gap:

1. Do not describe PVARA licensing or NOC approval as Shariah certification — the Act does not equate the two.
2. If Shariah compliance is part of the value proposition, commission an independent Shariah board opinion rather than relying on future PVARA machinery that has not yet been constituted.
3. Track PVARA’s Regulations under section 68 for the point at which the Shariah Advisory Committee’s mandate, if any, is formally defined.
4. In sandbox applications specifically, be ready to show evidence of Shariah-advisor consultation if the product’s risk profile makes it “applicable” under the Guidelines’ evaluation criteria.
5. Keep the fit-and-proper and AML documentation for Key Individuals current regardless — that assessment runs on its own track and is unaffected by whether a Shariah opinion has been obtained.

Why does the gap exist, and should it worry a market entrant?

Framework legislation of this kind routinely names a concept before the machinery around it is built — the same pattern shows up elsewhere in the Act, where terms such as High-Quality Liquid Assets are defined but their content is left “as may be prescribed by Regulations.” Read that way, the Shariah Advisory Committee looks less like an oversight and more like a placeholder the legislature expected the Authority to fill in later, alongside the broader body of Regulations still to come under PVARA’s licensing framework.

It should not stop a market entrant from proceeding with SECP incorporation or an NOC application. It should stop that entrant from telling customers, investors or banking partners that PVARA registration carries a religious-compliance guarantee it has not, on the text available today, actually made.

About this analysis

This analysis was prepared by the CoinConnect research desk from the Virtual Assets Act, 2026, the PVARA No Objection Certificate Regulations 2025, and the PVARA Sandbox Guidelines 2026, read as published. Where practice is not yet settled or guidance has not been issued, that is stated in the text above.

Regulatory positions change and specific requirements should be verified against the current position published by the relevant authority before you act on them. This is information and analysis, not legal advice, and it does not create an advisory relationship. Take professional advice on your own circumstances.