Pakistan Revokes Crypto Banking Ban, Welcomes Licensed Firms
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The central bank of Pakistan has made significant strides by lifting its ban on banking services for cryptocurrency firms, thereby paving the way for regulated banks to establish accounts for licensed virtual asset service providers (VASPs). This pivotal development follows the introduction of the Virtual Assets Act 2026, marking a crucial step towards integrating digital asset businesses into Pakistan’s formal financial landscape.
In a circular issued by the State Bank of Pakistan, it was highlighted that this initiative is set to enable banks to offer basic financial services to cryptocurrency entities, contingent upon these firms receiving appropriate licensing from the Pakistan Virtual Assets Regulatory Authority (PVARA). Bilal bin Saqib, the chairman of PVARA, emphasized the importance of this policy change, noting that it serves as a foundational measure for incorporating virtual assets into the nation’s banking system.
With the implementation of the new guidelines, banks are mandated to exercise diligence in verifying their VASP clients. They will need to establish and maintain updated risk profiles, as well as monitor for any suspicious activities in accordance with anti-money laundering and counter-terrorism financing protocols. Furthermore, client funds must be kept in segregated accounts that do not bear interest, strictly separating customer resources from company funds.
While this regulatory shift allows for greater integration of cryptocurrency firms within the banking sector, the State Bank has maintained a conservative stance regarding direct exposure to digital assets. As such, banks are expressly prohibited from investing in or trading cryptocurrencies using their own capital or customer funds, restricting their function to custodial and payment-related services linked to approved crypto operations.
This policy reversal is a stark contrast to Pakistan’s previous stance in 2018, which effectively isolated crypto firms from the banking ecosystem and hindered the growth of the sector. By adopting this new framework, the government aims to position Pakistan as an attractive hub for digital asset innovation and investment.
Efforts to boost the cryptocurrency market in Pakistan have already commenced. In December, officials signed a memorandum of understanding with Binance to explore tokenization projects that could potentially involve investments totaling up to $2 billion. Additionally, regulatory approvals have been issued to both Binance and HTX, signaling further engagement with global crypto entities.
Furthermore, Pakistan has pursued innovative financial infrastructure using blockchain technology. Discussions have taken place with an affiliate of World Liberty Financial regarding the possible utilization of stablecoins in cross-border transactions.
As Pakistan embarks on this new chapter in cryptocurrency regulation, the impact on the financial landscape could be transformative, potentially attracting diverse players and fostering growth in the digital asset arena.
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