Pakistan

Disclaimer: The regulatory information provided below is for general informational purposes only and may not reflect the most current legal developments. Cryptocurrency regulations are rapidly evolving and can change frequently. This information should not be considered legal or tax advice. Before making any business or investment decisions, please consult with qualified legal, tax, or financial professionals familiar with your specific jurisdiction and circumstances. Always verify current regulations with official government sources and regulatory bodies.

Legal Classification & Regulatory Framework

Cryptocurrency Status

Pakistan’s regulatory approach to cryptocurrency has undergone a dramatic transformation from prohibition to active regulation. For several years, the State Bank of Pakistan (SBP) maintained a cautious stance, issuing circulars that effectively prohibited financial institutions from facilitating cryptocurrency transactions. However, the country has since pivoted toward creating a comprehensive regulatory framework for digital assets.

Under the Virtual Assets Ordinance 2025, cryptocurrencies are now recognized as „virtual assets“ defined as a digital representation of value that can be digitally traded or transferred and used for payment or investment purposes. Importantly, while virtual assets are now within the legal structure, they are explicitly not recognized as legal tender in Pakistan. This means that while citizens and businesses can legally own, trade, and transact in cryptocurrencies under the new framework, digital currencies cannot be used to settle debts or function as official money in the same way as the Pakistani Rupee.

The government has established the Pakistan Crypto Council (PCC), an advisory and policy body operating under the Ministry of Finance, to guide the integration of blockchain technology and digital assets into the national financial landscape. Additionally, the Pakistan Virtual Assets Regulatory Authority (PVARA) was established as an autonomous regulatory body to license and oversee virtual asset service providers (VASPs).

Tax Treatment

The Federal Board of Revenue (FBR) is developing a comprehensive taxation framework for cryptocurrency activities. Under current and proposed guidelines, profits from the sale of cryptocurrencies are subject to Capital Gains Tax (CGT). Income earned from cryptocurrency mining, staking, or receiving payments in digital assets is treated as regular income and taxed under the standard income tax slabs, which range from lower rates for modest incomes to higher rates for substantial earnings.

All cryptocurrency transactions must be reported to the FBR using standard income tax return forms. Crypto businesses operating in Pakistan are subject to corporate income tax on their net profits. The tax framework is being developed in consultation with industry stakeholders and international bodies, including recommendations from the International Monetary Fund (IMF), as part of broader economic reform programs.

Non-compliance with reporting and payment obligations can result in monetary penalties and, in cases of serious tax evasion, potential criminal prosecution. Exchanges operating under license are expected to share transaction data with tax authorities and provide users with downloadable transaction histories for tax filing purposes.

Regulatory Oversight

Multiple government agencies share responsibility for cryptocurrency oversight in Pakistan. The Pakistan Virtual Assets Regulatory Authority (PVARA) serves as the primary licensing and supervisory body for virtual asset service providers. Its governing board includes representatives from key institutions, including the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan (SECP), the Federal Board of Revenue, and various federal ministries.

The State Bank of Pakistan (SBP) maintains its traditional role in monetary policy and financial stability, while also exploring the development of a Central Bank Digital Currency (CBDC). The SECP continues to handle securities-related matters and investor protection, while the FBR manages taxation policy. The Federal Investigation Agency (FIA) and the National Cyber Crime Investigation Agency (NCCIA) are involved in enforcing anti-fraud and other illicit activity.

Business Environment

Banking Relationships

The banking environment for cryptocurrency businesses in Pakistan is in a transitional phase. Historically, the SBP’s circulars prohibited financial institutions from facilitating cryptocurrency transactions, which forced most crypto activities into informal channels. With the introduction of the new regulatory framework, there is a path toward normalized banking relationships for licensed virtual asset service providers.

However, until the SBP formally withdraws its previous advisory and issues new guidance to banks, financial institutions may remain cautious about engaging with cryptocurrency businesses. Licensed VASPs operating under PVARA oversight are expected to gain improved access to banking services as the regulatory framework matures. Cross-border cryptocurrency transactions remain subject to foreign exchange regulations under the Foreign Exchange Regulation Act, which imposes caps and reporting requirements on international transfers.

Licensing Requirements

Under the Virtual Assets Ordinance 2025, any entity wishing to provide virtual asset services in or from Pakistan must obtain a license from PVARA. The licensing regime covers eight categories of virtual asset service providers, including cryptocurrency exchanges, custodial services, digital wallet providers, broker-dealers, and advisory services.

PVARA has issued calls for Expressions of Interest from international crypto exchanges and service providers. Notably, initial applicants must already hold licenses from recognized global regulators, including the US Securities and Exchange Commission, the UK Financial Conduct Authority, EU VASP frameworks, the UAE Virtual Assets Regulatory Authority, and the Monetary Authority of Singapore. Applicants must demonstrate robust compliance frameworks, particularly concerning Anti-Money Laundering (AML), Counter-Terrorism Financing (CTF), and Know-Your-Customer (KYC) standards.

The licensing process requires detailed company profiles, existing licensing information from other jurisdictions, compliance track records, and proposed business models for Pakistani operations. PVARA has indicated it will establish a tiered regime to accommodate businesses of different sizes and complexity.

Innovation Support

Pakistan has demonstrated significant government-level commitment to blockchain innovation. The Pakistan Crypto Council actively engages with international crypto organizations and has appointed prominent industry figures as strategic advisers. The government has announced plans to allocate surplus electricity capacity to Bitcoin mining operations and AI data centers, positioning Pakistan as a potentially attractive destination for energy-intensive blockchain operations.

PVARA’s mandate includes establishing regulatory sandboxes to encourage innovation, including Shariah-compliant financial products. The government has expressed ambitions to position Pakistan as a regional blockchain hub, competing with established crypto-friendly jurisdictions. Discussions around a government-backed Strategic Bitcoin Reserve and partnerships with international blockchain firms indicate an openness to cutting-edge developments in the digital asset space.

The State Bank of Pakistan is also preparing to launch a pilot program for a Central Bank Digital Currency (CBDC), which would modernize the country’s payment infrastructure and potentially facilitate regulated interactions between the traditional financial system and virtual assets.

Market Characteristics

Adoption Patterns

Pakistan has emerged as one of the most active cryptocurrency markets globally, with tens of millions of citizens estimated to hold cryptocurrency wallets. Despite years of regulatory uncertainty, grassroots adoption has flourished, driven by factors including currency volatility, high inflation, limited access to traditional financial services, and the need for efficient cross-border remittance solutions. Pakistan is among the world’s leading recipients of remittance payments, and blockchain-based solutions offer potential cost and speed advantages over traditional channels.

Most Pakistani cryptocurrency users have historically operated through international exchanges such as Binance, as local banking restrictions prevented the development of domestic platforms. Peer-to-peer trading has also been popular. With the new licensing framework, the government aims to bring these activities under formal oversight while providing consumers with access to regulated platforms.

Industry Focus

Pakistan’s cryptocurrency industry is expected to develop strengths in several areas. Remittance solutions represent a natural fit given the country’s large diaspora population and significant inbound payment flows. Cryptocurrency mining is attracting government support in regions with surplus electricity capacity, with dedicated power allocations for mining and data center operations under discussion.

The freelance and gig economy sectors, in which Pakistan has substantial participation, have shown interest in cryptocurrency payments as a means of receiving international compensation efficiently. Blockchain-based applications for financial inclusion, supply chain transparency, and digital identity verification are also areas of potential development.

Regulatory Evolution

Pakistan’s regulatory journey reflects broader global trends toward embracing rather than banning cryptocurrency. The shift from prohibition to regulation aligns the country with international standards established by the Financial Action Task Force (FATF), which previously placed Pakistan on its monitoring list. Compliance with FATF recommendations on virtual assets was a key driver of the new framework’s development.

The regulatory approach draws on models from various jurisdictions, with officials citing frameworks from the UAE, Singapore, and the European Union’s Markets in Crypto-Assets Regulation (MiCA) as reference points. The Virtual Assets Ordinance and PVARA’s structure aim to balance the encouragement of innovation with robust consumer protection and safeguards for financial integrity.

As an ordinance, the initial legislation requires parliamentary action to become permanent law, and ongoing amendments and refinements to the regulatory framework are expected as Pakistan gains experience operating under the new system. Stakeholder consultations and bi-monthly regulatory meetings are planned to ensure the framework evolves responsively.

For Current Information:

• State Bank of Pakistan (SBP): https://www.sbp.org.pk/
• Securities and Exchange Commission of Pakistan (SECP): https://www.secp.gov.pk/
• Federal Board of Revenue (FBR): https://www.fbr.gov.pk/
• Ministry of Finance, Government of Pakistan: https://www.finance.gov.pk/