The Lahore High Court (LHC) has clarified that peer-to-peer (P2P) cryptocurrency transactions do not automatically constitute fraud or electronic crime. The court also ruled that receiving crypto-related payments through a bank account does not, by itself, establish criminal wrongdoing.
The court issued the ruling in a detailed 15-page judgment this week. Justice Tariq Saleem Sheikh upheld the pre-arrest bail of three people accused by the Federal Investigation Agency (FIA) in a cryptocurrency-related case.
The decision provides important clarification about private cryptocurrency trading in Pakistan. It also distinguishes between conducting crypto transactions and committing a criminal offence through digital assets.
FIA Accuses Three People in Crypto Case
The FIA alleged that the accused received money from the complainant through their bank accounts. According to the complainant, he transferred nearly Rs. 686 million while purchasing around 270,000 USDT.
The complainant said an acquaintance persuaded him to invest in cryptocurrency. However, he later claimed that his cryptocurrency account became frozen.
The FIA subsequently investigated the transactions and accused the three individuals. However, the LHC found that the available evidence did not establish their direct involvement in the alleged wrongdoing.
Court Sets Conditions for Crypto Fraud Charges
The LHC stated that transferring virtual assets or receiving money through a bank account cannot alone prove fraud, forgery, or offences under the Prevention of Electronic Crimes Act (PECA).
Instead, investigators must establish specific criminal conduct. For example, prosecutors must show that the accused deliberately deceived the investor or created forged electronic records.
Additionally, investigators must establish a direct connection between the accused and the freezing of the complainant’s cryptocurrency account.
The court found no evidence showing that the accused misled the complainant or manipulated electronic records. Moreover, investigators could not establish that the accused controlled the platform where the assets became frozen.
Crypto Trading Not Automatically Illegal in Pakistan
The court also addressed the legal status of cryptocurrency in Pakistan. It noted that cryptocurrencies do not qualify as legal tender in the country.
However, the court clarified that this status alone does not make cryptocurrency transactions illegal. The judgment also discussed the State Bank of Pakistan’s 2018 circular concerning virtual currencies.
According to the court, the circular places restrictions on regulated financial institutions. It does not automatically create a criminal offence for individuals who conduct personal cryptocurrency trading.
Furthermore, the court stated that buying or selling USDT does not violate foreign exchange laws by itself. Prosecutors must establish that the transaction involved an unlawful foreign exchange activity.
LHC Upholds Pre-Arrest Bail
After reviewing the available evidence, the LHC found insufficient grounds to establish the accused individuals’ direct involvement in the alleged offences. Consequently, the court ruled that keeping the accused in physical custody was unnecessary. It therefore allowed their pre-arrest bail to remain in place.
The ruling highlights an important legal distinction between cryptocurrency activity and criminal conduct. While Pakistan does not recognize cryptocurrency as legal tender, the court emphasized that authorities still need evidence of a specific offence before pursuing criminal liability.
The judgment could also influence future investigations involving P2P crypto trading, bank transfers, and digital asset disputes. However, each case will still depend on its own facts and the evidence presented before the courts.
