The State Bank of Pakistan (SBP) has lifted its seven-year ban on banking services for digital asset firms, issuing a new directive that allows banks to open accounts for licensed Virtual Asset Service Providers (VASPs).
The move, which immediately replaces a 2018 circular that barred banks from processing or transferring value in cryptocurrencies such as bitcoin and litecoin, brings Pakistan’s fast-growing crypto market into the formal financial system under strict regulatory controls.
Who can now be banked
Under the new rules, banks, microfinance institutions, and payment operators can open accounts for entities that:
- hold a valid license from the Pakistan Virtual Asset Regulatory Authority (PVARA), or
- possess a temporary No Objection Certificate (NOC) issued by PVARA.
Before onboarding, financial institutions must verify the licensing or NOC status of each VASP and apply enhanced due diligence in line with anti-money laundering and counter-terrorism financing (AML/CFT) standards.
Segregated client accounts in rupees
All authorized VASPs are required to maintain segregated Client Money Accounts in Pakistani rupees:
- funds must be fully separated from the VASP’s own operational accounts
- these accounts must be non-interest-bearing
- there are restrictions on cash deposits and withdrawals
- balances in these accounts cannot be used as collateral
The structure is intended to shield user assets from operational risks at the service provider level and to keep flows anchored in the domestic banking system.
Limits on banks’ own exposure to digital assets
The framework explicitly bars banks and other regulated financial institutions from:
- trading digital assets for their own account
- investing in digital assets using proprietary funds
- providing custody of digital assets, either with their own funds or customer deposits
Institutions must ensure no mixing of client assets and are required to report unusual or suspicious transaction patterns involving VASPs to the Financial Monitoring Unit (FMU).
Tighter risk monitoring requirements
Director Ali said that banks must update their customer risk models to reflect exposure to digital asset operations. The new regime introduces:
- continuous monitoring of accounts linked to VASPs
- heightened scrutiny of transactional behavior
- reporting obligations under Pakistan’s AML/CFT framework
These measures align the new rules with Financial Action Task Force (FATF) standards.
Backed by new law and criminal penalties
The policy shift follows Parliament’s passage of the Virtual Assets Act, 2026, which established PVARA as the national supervisory body for digital asset activities.
The law imposes criminal penalties for unlicensed operations, including:
- fines up to PKR 50 million (about $179,000)
- prison terms of up to five years
This legal backing makes compliance with licensing and reporting rules mandatory for all firms operating in the sector.
From grey market to regulated sector
Pakistan’s digital asset market has grown rapidly despite the earlier banking ban. An early-2026 report estimated:
- 27.1 million active users
- roughly $25 billion in transaction volume during 2025
The 2025 Chainalysis Global Crypto Adoption Index ranked Pakistan third worldwide, highlighting strong engagement even without a full legal framework.
The SBP directive effectively formalizes this previously grey market. All service providers wishing to continue operations must:
- obtain a PVARA license or at least a temporary NOC, or
- wind down activities within six months
Access to the formal banking system is now tied directly to meeting the authority’s standards.
Impact on users and platforms
For individuals and entities using digital asset services:
- activity must now flow through platforms that hold a PVARA license or temporary NOC
- several major international exchanges have already initiated the NOC process
- all legally accessible platforms will be known to regulators and subject to ongoing supervision
The mandatory use of segregated, rupee-denominated Client Money Accounts is designed to protect users by preventing the use of their funds for a platform’s corporate needs.
Integration with wider national strategy
The regulatory framework sits within a broader government strategy that includes:
- allocating 2,000 megawatts of surplus power for digital asset mining operations
- publicly signaling intentions to build a strategic bitcoin reserve
Taken together, the new banking rules, the Virtual Assets Act, and national-level initiatives suggest a coordinated policy to integrate blockchain-based activity into Pakistan’s economic infrastructure, while maintaining tighter control over risks to the financial system.
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