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announced the SBP’s change of stance during a Senate Committee briefing, confirming that the 2018 advisory would be rescinded once the Bill became law.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
| Aspect | Pakistan (2025) | ElSalvador | United States | China | India |
|---|---|---|---|---|---|
| Legal status of crypto holdings | Legal, licensed transfer only | Legal tender, unlimited use | Legal, regulated exchanges | Illegal for private use | Legal, taxed heavily |
| Retail payments | Prohibited | Allowed (Bitcoin) | Allowed via licensed apps | Not allowed | Allowed with compliance |
| CBDC development | Digital Pakistani Rupee (pilot 2025) | None | No official CBDC yet | Digital Yuan (wide rollout) | Exploratory phase |
| Regulatory authority | PVARA (autonomous) | None (government‑led) | SEC, FinCEN, state agencies | People’s Bank of China (strict ban) | RBI, SEBI (tax & compliance) |
| AML/CTF focus | Strict licensing & reporting | Limited | Robust, multiple layers | Very strict, zero tolerance | Strong, tax‑driven |
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:
- Taxation & revenue: Formalizing the $21billion market allows the government to collect taxes, improving fiscal health.
- Foreign investment: Clear licensing attracts blockchain startups and fintech firms looking for a regulated entry point.
- 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.
Frequently Asked Questions
Is owning Bitcoin legal in Pakistan now?
Yes. After the Virtual Assets Bill 2025, individuals can hold and transfer Bitcoin through licensed VASPs, but they cannot use it for everyday purchases.
Can I open a crypto exchange in Pakistan?
You can, but you must obtain a license from PVARA, implement AML/CTF controls, and comply with strict reporting requirements. The regulatory sandbox may help you prototype before full licensing.
What is the Digital Pakistani Rupee?
It is Pakistan’s upcoming CBDC, a state‑issued digital version of the rupee. The SBP will pilot it later in 2025, allowing instant, low‑cost transfers under central bank oversight.
Will crypto be accepted at shops in the future?
Currently no. The government may run limited pilot programs that permit retail crypto payments, but any expansion will depend on the CBDC pilot’s success and further regulatory amendments.
How does the new law affect remittances?
Remittances can be routed through licensed crypto platforms, reducing fees and settlement times. This aligns with Pakistan’s goal to modernize cross‑border payments for its large overseas workforce.
Bruce Safford
October 13, 2025 AT 09:23Look, they’re not just "modernizing" payments – they’re building a digital leash. Every transaction will be tracked, and the so‑called CBDC is a Trojan horse for state control. If you think they’re protecting investors, you’re buying the narrative they sell on TV. The real agenda is surveillance, and the crypto ban was only a cover. This is why the underground market will keep thriving underground, because people won’t trust a system that records every move. 🙄
Kim Evans
October 22, 2025 AT 04:03Hey there! 😊 The new framework actually gives a clear path for legitimate projects to operate under oversight, which can attract foreign investment. It’s not perfect, but it’s a step forward from the total ban. ★
Jordan Collins
October 30, 2025 AT 22:43The Virtual Assets Bill 2025 marks a pivotal shift in Pakistan’s approach to digital finance, moving from prohibition to a regulated ecosystem. By establishing PVARA, the government has created a dedicated authority to oversee licensing, AML, and CTF compliance, which should bring much‑needed transparency to the $21 billion underground market. The inclusion of the State Bank of Pakistan as a supervisory body for the upcoming Digital Pakistani Rupee ensures that the central bank retains monetary control while still allowing private crypto holdings under strict conditions. This bifurcated model mirrors the approach taken by several jurisdictions that seek to balance innovation with macro‑economic stability.
One of the most significant aspects of the new law is the clear delineation between permissible and prohibited activities. Holding and transferring Bitcoin or Ethereum through licensed VASPs is now legal, which legitimizes existing holdings and can reduce the risk of illicit activity. However, the prohibition on retail payments and DeFi services reflects a cautious stance, aiming to prevent unchecked financial experimentation that could undermine the financial system.
From an economic perspective, the formalization of crypto activities opens a new tax base, potentially generating substantial revenue for a country facing fiscal challenges. Moreover, the allowance for crypto‑enabled remittances could lower transaction costs for the diaspora, boosting net inflows and fostering financial inclusion.
Nevertheless, the regulatory burden may deter smaller startups that lack the resources to meet stringent licensing requirements. The sandbox initiative by the Pakistan Crypto Council is a promising mitigator, offering a controlled environment for innovation before full licensing. Its success will largely depend on how quickly PVARA processes applications and whether it adopts a proportionate supervisory approach.
Internationally, Pakistan’s hybrid model positions it between the ultra‑permissive stance of El Salvador and the outright bans of China. This middle path could make Pakistan an attractive hub for compliant crypto services in South Asia, especially if the CBDC pilot demonstrates stability and efficiency.
In summary, the legislation provides legal certainty for crypto holders while maintaining a firm grip on systemic risk. The ultimate impact will hinge on implementation speed, regulatory flexibility, and the government’s willingness to adjust restrictions as the market matures.
Andrew Mc Adam
November 8, 2025 AT 17:23Wow, this is a real game‑changer! The fact that Pakistan is finally rolling out a proper licensing regime means innovators can actually plan long‑term projects without fearing a sudden ban. The sandbox program is especially exciting – it gives startups a safe space to test ideas before they’re forced into compliance hell. Of course, the regulatory paperwork might be a nightmare for small teams, but having a clear roadmap is far better than the old legal limbo. Let’s hope the authorities keep the process transparent and don’t turn it into a gate‑keeping nightmare. 🎭
Shrey Mishra
November 17, 2025 AT 12:03The formal tone of the new bill showcases Pakistan’s desire to align with international standards while retaining sovereign control over monetary policy. By positioning the SBP at the core of the CBDC pilot, the state signals its commitment to a centralized digital currency, which could streamline cross‑border payments and enhance financial inclusion. Yet, the restrictive stance on DeFi and retail usage underscores a cautious approach, possibly intended to avoid the regulatory pitfalls observed in other emerging markets.
Ken Lumberg
November 26, 2025 AT 06:43This is exactly the kind of responsible regulation we need. Allowing licensed transfers while banning direct retail use protects consumers from volatility and fraud. If the government stays firm on AML/CTF standards, it will build trust with international partners and attract legitimate investment.