As a result, the same cryptocurrency can be treated differently depending on the country.
Malaysia Has a Formal Sharia Framework
Malaysia is one of the few countries with a formal system for deciding whether digital assets comply with Sharia. Fitch said Malaysia’s Securities Commission Shariah Advisory Council approved several cryptocurrencies as Sharia-compliant between 2020 and the first half of 2026, including Bitcoin, Ethereum, XRP and Stellar.
As at the end of the first half of 2026, 10 crypto businesses, including exchanges and custodians, were regulated by the Securities Commission. Regulated exchanges handled more than $4 billion in trading in 2025, a 23% increase from the previous year.
Malaysia’s Shariah Advisory Council said in 2020 that regulated digital currencies could be considered mal, meaning something with value that can be traded.
The council also distinguishes between different types of digital assets. Some have no underlying asset, while others are backed by gold, silver, or currencies. Tokens can also qualify as mal when the money raised is used for Sharia-compliant purposes, and the rights attached to the tokens follow Sharia principles.
UAE Combines Regulation With a Bitcoin Ruling
But the UAE has taken a different approach. It has built a large virtual-asset regulatory system and also issued a national Sharia ruling on Bitcoin.
Fitch said virtual-asset transactions involving entities regulated by Dubai’s Virtual Assets Regulatory Authority reached almost $680 billion in 2025. Assets under management exceeded $2.5 billion, and more than 55 virtual-asset service providers had been licensed by September 2026.
The UAE’s Higher Shari’ah Authority also ruled in 2025 that dealing in Bitcoin is permissible. Fitch said some conventional and Islamic banks later began offering cryptocurrency brokerage and custody services.
The main difference from Malaysia is that Malaysia focuses more on the characteristics and use of individual digital assets. In contrast, the UAE has combined crypto regulation with a national ruling allowing Bitcoin dealings.
Bahrain and Qatar Are Developing Crypto Infrastructure
Bahrain is also developing a regulated crypto market. Fitch said Bahrain had nine crypto-asset service providers as of September 2026, with some offering Sharia-compliant services. The Central Bank of Bahrain also licensed the country’s first stablecoin issuer in June.
Qatar has taken a somewhat different approach. Its digital-asset infrastructure is developing, but cryptocurrency itself has not expanded as much.
This means blockchain-based products such as tokenized real-world assets, sukuk and other asset-backed structures could develop before widespread cryptocurrency activity by banks.
Saudi Arabia Remains More Restrictive
Saudi Arabia has taken a more cautious approach. Fitch said the country has not introduced legislation specifically governing cryptocurrencies.
Meanwhile, the lack of crypto legislation does not prevent blockchain technology from developing in Saudi Arabia. It simply means the country does not yet have the same kind of specific regulatory framework found in places such as the UAE and Bahrain.
Pakistan Shows the Disagreement Over Sharia
Pakistan illustrates how Sharia rulings can sometimes conflict with the direction of financial regulation.
In June 2026, Darul Ifta at Jamia Darul Uloom Karachi issued a fatwa signed by Sheikh Muhammad Taqi Usmani saying that cryptocurrencies do not qualify as maal, or recognized wealth, under Sharia. The ruling also said using cryptocurrency to buy goods was not permissible.
At the same time, Pakistan has been developing its own regulatory framework for virtual assets.
Reuters reported that Pakistan’s Virtual Assets Regulatory Authority later asked the seminary for clarification. The regulator argued that different digital assets should not necessarily be treated in the same way.
For example, speculative cryptocurrencies, gold-backed tokens, stablecoins and tokenized real-world assets have different characteristics.
Global Islamic-Finance Standards Remain Incomplete
Fitch said the lack of comprehensive guidance from organizations such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB) contributes to the differences between countries.
One important qualification is that the IFSB has already addressed some crypto-assets in its IFSB-24 investor-protection standard. It divides crypto-assets into different categories and includes some security tokens.
However, other types of crypto-assets are not covered and remain subjects of Sharia debate. AAOIFI also has a large collection of Sharia standards, but it has not issued one comprehensive ruling covering every type of cryptocurrency.
Because countries such as Bahrain, Pakistan, Qatar and the UAE use AAOIFI standards as guidance, the lack of a single crypto-specific approach remains important.
Bottom line
The result is a fragmented market. Fitch said Islamic banks in the Gulf, Pakistan and other markets already participate indirectly by providing payment services to licensed crypto exchanges. However, most rated Islamic banks have not yet earned significant revenue from crypto trading, brokerage, custody or financing.
Greater involvement could create new sources of fee income, but it would also expose banks to risks involving reputation, liquidity, operations, regulation and Sharia compliance.
The future of cryptocurrency in Islamic finance depends more on than whether governments allow it. It will also depend on how each country interprets Sharia concepts such as maal (wealth), currency, speculation, and asset backing.
Until these interpretations become more consistent, cryptocurrency will continue to face very different rules across Islamic finance markets.
Related: Pakistan Crypto Laws: Which Exchanges Are Legal, and What If None Are Licensed?
