What the LHC's P2P crypto ruling does and doesn't say

Key takeaways

• The Lahore High Court held that receiving rupees for USDT in a P2P trade is not, on its own, proof of fraud, forgery or electronic crime.
• It is a bail decision about trades from 2021 to 2023, before the Virtual Assets Act. The judge called his observations "tentative".
• PVARA told the court that P2P transactions do not fall within its mandate under the Virtual Assets Act.
• The State Bank told the court that virtual assets are not foreign currency or foreign exchange under FERA.

A Lahore High Court judge has ruled that three people who received rupee payments for USDT through a P2P crypto platform cannot, on the evidence so far, be treated as fraudsters simply because the money reached their bank accounts. Justice Tariq Saleem Sheikh of the court's Multan bench confirmed their pre-arrest bail in an FIA cybercrime case. The trades in question took place between 2021 and 2023, before Pakistan had any virtual-asset law. The order sheet is dated 30 April 2026; the judgment, reported as 2026 LHC 4849, was covered in the press from 30 July 2026.

The ruling resurfaced on social media in late September 2026 as "P2P crypto trading is not a crime." That goes further than the judge did. This was a bail application, and the order says its observations "are tentative and confined to the decision of this bail application." What it does offer is rare: a Pakistani court, with three regulators on the record, setting out where P2P trading actually stands.

What the case was about

The complainant told the FIA that, on an acquaintance's advice, he had bought USDT through P2P merchants on a crypto app. He paid rupees into the merchants' bank accounts and received USDT in return, investing more after each market fall. He said the trading company later froze his account. The FIA found 351 transactions through 237 bank accounts, totalling Rs68,664,460. Some reports put the figure at Rs686 million; the judgment records about Rs68.7 million.

The three petitioners were among the merchants who had received his payments. The individual amounts attributed to them range from Rs31,611 to Rs499,500.

What the court held

On each charge, the judge found the evidence did not yet reach the offence:

• Cheating (s.420 PPC): the complainant received the USDT he paid for, and nothing showed the petitioners caused the platform to freeze his account.
• Forgery (ss.468 and 471 PPC): no forged document or electronic record had been identified.
• Electronic forgery and fraud (ss.13 and 14 PECA): the fact that a trade happened online "does not automatically establish electronic forgery or electronic fraud against every recipient of funds." Nothing showed the petitioners induced the complainant to use the platform, vouched for it, or worked with its operators.

On the wider legal question, the judge held that the State Bank's 2018 circular was addressed to banks and payment firms and "did not, by itself, create a penal offence against private individuals." Calling virtual currencies "not legal tender" did not make them illegal. The Virtual Assets Act 2026 "does not retrospectively determine criminal liability" for trades made before it.

He also rejected, for now, the government lawyer's argument that USDT counts as foreign currency under the Foreign Exchange Regulation Act, 1947. The order leaves room for FERA where a trade involves real foreign-exchange dealing or payments abroad. It adds that anti-money-laundering, tax and banking law may still apply where their own ingredients are proved.

What the regulators told the court

The judge asked PVARA, the State Bank and the SECP how the law classifies crypto. Their written answers, recorded in the order, are the most useful part of it:

• PVARA, as the order records it, said the Virtual Assets Act treats virtual assets as a distinct category that is not legal tender, and that P2P transactions do not fall within its mandate under the Act.
• The State Bank said virtual assets are not foreign currency or foreign exchange under FERA or the State Bank of Pakistan Act.
• The SECP said crypto cannot currently be treated as a security under the Securities Act 2015 or a commodity under the Futures Market Act 2016.

What this means for Pakistani users

If you sold USDT on a P2P platform before the Act, this order supports the view that receiving a buyer's rupees was not, by itself, a crime. It does not protect anyone who deceived a buyer, operated fake accounts, or helped run a platform. Liability is individual. It is a bail order, not a trial verdict, so the FIA can still investigate and the trial court decides the case on its own evidence.

If you sell now, the order says nothing about trades after the Virtual Assets Act. The Act binds businesses that provide virtual-asset services, not individuals, and PVARA has no licence rule for individual sellers yet. Whether a P2P merchant trading at volume counts as a business under the Act is an open question.

If you buy USDT on P2P, note what PVARA said: P2P sits outside its mandate. No licence, and no regulator, stands behind the person on the other side of your trade. That is why escrow matters; we explained how Binance P2P escrow works.

If a platform freezes your account, this case suggests the merchants who sold you USDT are not automatically responsible. The court found nothing linking them to the freeze.

Keep records either way. The petitioners' case rested on documents: bank statements, transaction records and account details. Keeping a record of each order and payment is sensible if a trade is ever questioned.

This is reporting on a court order, not legal advice. If you are under investigation, speak to a lawyer.

For the wider picture, see is crypto legal in Pakistan and why the Virtual Assets Act regulates businesses, not holders.

What we're watching

• PVARA and P2P. If P2P is outside its mandate, the regulations under the Act will have to decide whether P2P merchants trading at volume are treated as service providers. We will report any consultation that touches P2P.
• The State Bank's position on FERA. Its statement that virtual assets are not foreign exchange is on the record in a court order. Whether it appears in formal SBP guidance matters for every P2P user.
• The FIA's approach. The cases that reach court will show whether investigations shift from P2P merchants who merely received money to the people who deceived buyers.

Sources

• Lahore High Court, Hammad Ali and others v. The State and another, Crl. Misc. No. 1974-B/2026, 2026 LHC 4849: https://sys.lhc.gov.pk/appjudgments/2026LHC4849.pdf
• State Bank of Pakistan, BPRD Circular No. 03 of 2018, "Prohibition of Dealing in Virtual Currencies/Tokens" (6 April 2018), as recorded in the judgment at ¶23.
• State Bank of Pakistan, Circular No. ECD/M&PRD/PR/01/2025-36 (30 May 2025), as quoted in the judgment at ¶24.
• Virtual Assets Act, 2026 (Act No. XIII of 2026), gazette copy: https://na.gov.pk/uploads/documents/69aae92ebf61c_955.pdf