Pakistan Crypto Regulation 2025: From Ban to Legalization

Pakistan Crypto Regulation 2025: From Ban to Legalization

In September 2025 Pakistan pulled the plug on a decade‑long crypto ban and rolled out a full‑scale legal framework. The move flips the State Bank of Pakistan’s 2018 advisory on its head, promising a regulated market for digital assets while simultaneously gearing up for a state‑run Central Bank Digital Currency (CBDC). If you’ve been watching the local crypto scene, this is the moment that finally provides legal certainty - but it also comes with a set of strict rules that shape how the market can evolve.

What triggered the 2025 pivot?

The catalyst was a blend of economic pressure and global trends. Pakistan’s $21billion underground crypto economy was growing fast, driven by remittance flows and a tech‑savvy youth. At the same time, neighbouring economies were either embracing crypto (UAE) or tightening controls (China), leaving Pakistan in a regulatory limbo. In July 2025 President Asif Ali Zardari signed the Virtual Assets Bill 2025 an ordinance establishing a dedicated regulatory authority and outlining licensing, AML, and data‑privacy requirements for virtual asset service providers. The bill paved the way for the Pakistan Virtual Asset Regulatory Authority (PVARA) to take charge.

The new regulatory architecture

Four bodies now sit at the heart of Pakistan’s crypto ecosystem:

• State Bank of Pakistan (SBP) the central bank that once banned crypto transactions and now oversees the Digital Pakistani Rupee pilot
• Pakistan Virtual Asset Regulatory Authority (PVARA) autonomous regulator responsible for licensing Virtual Asset Service Providers (VASPs) and enforcing AML/CTF measures
• Pakistan Crypto Council (PCC) advisory body aimed at fostering blockchain innovation and guiding policy refinements
• Pakistan Digital Assets Authority (PDAA) technical committee that drafted the detailed regulations supporting the Bill

Acting Deputy Governor Dr. Inayat Hussain publicly announced the SBP’s change of stance during a Senate Committee briefing, confirming that the 2018 advisory would be rescinded once the Bill became law. Governor Jameel Ahmad, meanwhile, outlined the roadmap for a CBDC called the Digital Pakistani Rupee, slated for a pilot later in 2025.

What the law actually allows (and what it still blocks)

Legalization is not a free‑for‑all. The framework distinguishes between permissible activities and prohibited ones:

• Allowed: Holding and transferring existing cryptocurrencies (e.g., Bitcoin, Ethereum) between personal wallets, provided the parties are licensed VASPs.
• Allowed: Using approved crypto platforms for cross‑border remittances and fintech pilot projects.
• Prohibited: Direct retail payments with crypto at brick‑and‑mortar stores.
• Prohibited: Open investment trading of altcoins on unregulated exchanges.
• Prohibited: Any decentralized finance (DeFi) services that operate outside PVARA supervision.

This “strict‑control, not full‑adoption” model mirrors China’s approach to private crypto while still recognizing existing holdings. It aims to funnel the $21billion underground market into the formal financial system without surrendering monetary policy control.

How Pakistan’s model stacks up against other jurisdictions

The table shows Pakistan carving a middle path: it legalizes holdings but blocks everyday payments, unlike ElSalvador’s open‑till‑the‑end approach or the U.S.’s broader trading environment. The emphasis on a state‑controlled CBDC further aligns it with China’s model, though Pakistan still permits private crypto wallets under supervision.

Market impact: opportunities and constraints

Pakistan crypto regulation is expected to unlock several benefits:

1. Taxation & revenue: Formalizing the $21billion market allows the government to collect taxes, improving fiscal health.
2. Foreign investment: Clear licensing attracts blockchain startups and fintech firms looking for a regulated entry point.
3. Remittance efficiency: Crypto‑enabled cross‑border transfers could lower costs for the 8‑million‑strong overseas workforce.

At the same time, constraints may dampen enthusiasm:

• Retail merchants cannot accept crypto, limiting real‑world utility.
• Altcoin trading restrictions push innovators toward offshore platforms, reducing domestic ecosystem growth.
• Heavy compliance costs for VASPs could slow market entry, especially for small startups.

Analysts warn that the net effect will hinge on how quickly PVARA rolls out licensing and how flexible the regulator becomes as the market matures.

Implementation hurdles and how they’re being tackled

Launching the new regime is no small feat. Key challenges include:

• Technical infrastructure: Building the CBDC backbone, integrating it with existing banking APIs, and ensuring cybersecurity.
• Human capital: Recruiting digital‑finance experts for PVARA, as highlighted by senators demanding “youthful expertise”.
• Compliance ecosystem: VASPs must install AML/CTF monitoring tools, which many small firms lack.
• Public awareness: Educating users about the legal limits and the licensing process.

To address these, the SBP has partnered with international CBDC labs for technical guidance, while the PCC runs a series of webinars targeting fintech entrepreneurs. PVARA is also offering a “sandbox” environment where innovators can test services under close supervision before full licensing.

Future outlook: Will the restrictions soften?

All signs point to a gradual easing. The Senate’s Standing Committee is still reviewing the Bill, and early feedback from the crypto community suggests the government may expand permissible use‑cases once the Digital Pakistani Rupee pilot proves stable. Potential next steps include:

• Allowing crypto‑based retail payments in selected pilot cities.
• Introducing limited DeFi services under a “regulated token” framework.
• Creating tax incentives for blockchain R&D to attract regional talent.

If Pakistan can balance oversight with innovation, it could transition from a “controlled market” to a regional hub for compliant crypto services. If the restrictions stay rigid, the country may lose out to more permissive neighbours like the UAE.