In a significant ruling for Pakistan’s cryptocurrency sector, the Lahore High Court (LHC) has held that peer-to-peer (P2P) virtual asset transactions and the receipt of related payments in bank accounts cannot, on their own, be treated as evidence of fraud or electronic crime.
Justice Tariq Saleem Sheikh issued the ruling while confirming the pre-arrest bail of three individuals booked by the Federal Investigation Agency (FIA) over alleged cryptocurrency-related offences.
The case stemmed from a complaint by Muhammad Farhan, who told investigators he was persuaded by an acquaintance to invest in cryptocurrency. According to the complaint, he eventually purchased about 270,000 USDT, transferring nearly Rs. 686 million to multiple individuals after selling his house, vehicles, business assets, and gold. He later alleged that the online platform froze his account, leaving him unable to access his holdings.
The FIA accused Hammad Ali, Asad Amjad and Muhammad Athar of acting as P2P crypto merchants who received the transferred funds, registering a case under the Pakistan Penal Code and the Prevention of Electronic Crimes Act (PECA).
The court, however, found that the prosecution had failed to establish any direct link between the accused and the alleged fraud. It observed that simply receiving money or facilitating virtual asset transfers does not prove criminal intent. Instead, investigators must demonstrate that the accused deceived the complainant, forged electronic records, or were involved in freezing the crypto account.
The judgment also clarified that while cryptocurrencies are not recognized as legal tender in Pakistan, they are not automatically illegal. It noted that the State Bank of Pakistan’s 2018 advisory applies to banks and regulated financial institutions, not private individuals, and does not criminalize personal cryptocurrency trading. The court further observed that buying or selling USDT does not breach foreign exchange laws unless an unlawful foreign exchange transaction is specifically proven.
With no evidence linking the accused to deception, document forgery, or control over the platform that froze the complainant’s account, the LHC concluded that further custodial investigation was unnecessary and upheld their pre-arrest bail.
