The Lahore High Court has ruled that peer-to-peer cryptocurrency transactions and the receipt of related funds in a bank account do not, by themselves, constitute fraud or an electronic crime.
Justice Tariq Saleem Sheikh issued the ruling in a 15-page judgment, upholding the pre-arrest bail of three individuals accused by the Federal Investigation Agency in a cryptocurrency trading case.
The FIA alleged that the accused had received money from a complainant through their bank accounts. The complainant said he transferred nearly Rs 686 million to purchase around 270,000 USDT after an acquaintance persuaded him to invest in cryptocurrency, and later claimed his crypto account was frozen.
The court held that transferring virtual assets or receiving money through a bank account is not sufficient on its own to establish offences such as fraud, forgery, or violations of the Prevention of Electronic Crimes Act.
Investigators, it said, must instead prove that the accused deceived the investor, created forged electronic records, or bore direct responsibility for freezing the account.
The judgment also addressed the legal status of cryptocurrency in Pakistan. While digital currencies are not recognized as legal tender, the court said this does not make them illegal.
It noted that the State Bank of Pakistan 2018 circular applies to regulated financial institutions rather than private individuals, and does not criminalize personal crypto trading.
The court further ruled that buying or selling USDT does not breach foreign exchange laws unless prosecutors can demonstrate an illegal foreign exchange transaction took place.
Finding no evidence that the accused misled the complainant, tampered with electronic records, or controlled the platform on which the assets were frozen, the LHC concluded that their physical custody was unnecessary and allowed the pre-arrest bail to stand.
