The Lahore High Court (LHC) has ruled that peer-to-peer (P2P) cryptocurrency trading and receiving money from such transactions in a personal bank account are not automatically considered fraud or cybercrime in Pakistan.
The decision came in a detailed 15-page judgment issued by Justice Tariq Saleem Sheikh, who upheld the pre-arrest bail of three people accused by the Federal Investigation Agency (FIA) in a case related to cryptocurrency trading.
Case Involved USDT Transactions
According to the FIA, the three accused received money from a complainant through their bank accounts during cryptocurrency transactions.
The complainant claimed that he transferred nearly Rs. 686 million to buy around 270,000 USDT (Tether) after an acquaintance convinced him to invest in cryptocurrency.
Later, the complainant said his crypto account was frozen, and he accused the people involved in the transactions of fraud.
Court Says More Proof Is Needed
The Lahore High Court said that simply buying or selling cryptocurrency or receiving money in a bank account is not enough to prove fraud, forgery, or an offence under the Prevention of Electronic Crimes Act (PECA).
The court explained that investigators must provide clear evidence showing that the accused:
- Deliberately deceived or misled the investor.
- Created or used fake electronic records.
- Were directly responsible for freezing the complainant’s cryptocurrency account.
Without such evidence, criminal charges cannot be based only on the transfer of cryptocurrency or money.
Crypto Is Not Legal Tender, But Not Illegal
The judgment also clarified Pakistan’s legal position on cryptocurrencies.
The court said that cryptocurrencies are not recognized as legal currency in Pakistan, meaning they cannot officially be used as money for everyday payments.
However, the court also stated that this does not mean owning, buying, or selling cryptocurrency is automatically illegal.
SBP Circular Does Not Criminalize Personal Crypto Trading
The court referred to the State Bank of Pakistan (SBP) circular issued in 2018.
According to the judgment, the SBP’s instructions mainly apply to banks and other regulated financial institutions, preventing them from dealing in cryptocurrencies.
The court said the circular does not make personal cryptocurrency trading a criminal offence for private individuals.
USDT Trading Does Not Automatically Break Forex Laws
The court also ruled that buying or selling USDT (Tether) does not automatically violate Pakistan’s foreign exchange laws.
To prove such an offence, prosecutors must show that the transaction involved an illegal foreign exchange activity. Simply trading USDT is not enough to establish a violation.
No Evidence Against the Accused
After reviewing the case, the Lahore High Court found no evidence that the three accused:
- Misled or cheated the complainant.
- Manipulated electronic records.
- Controlled the cryptocurrency platform where the complainant’s account was frozen.
Since the investigation did not establish these allegations, the court ruled that there was no need to arrest the accused for further investigation.
Pre-Arrest Bail Remains in Place
Based on its findings, the Lahore High Court allowed the pre-arrest bail of all three accused to continue.
The judgment highlights that while cryptocurrency is still not recognized as legal tender in Pakistan, P2P crypto trading and receiving related payments through a bank account are not criminal offences on their own. Authorities must present clear evidence of fraud, deception, or other illegal actions before such cases can lead to criminal prosecution.
