Key Points
- Virtual Assets Act 2026 establishes a formal legal framework for digital assets
- Pakistan Virtual Asset Regulatory Authority (PVARA) was created as the sector regulator
- Banks allowed to serve licensed virtual asset firms under strict conditions
- Separate client money accounts are mandated with tight usage restrictions
- Introduces enhanced Anti-Money Laundering (AML) and risk compliance requirements
ISLAMABAD: Pakistan has formally legalised virtual assets, activating the recently legislated Virtual Assets Act 2026, marking the evolution of the country’s approach to digital finance and bringing the sector under a regulated framework.
In a circular, the State Bank of Pakistan confirmed that the new law establishes the Pakistan Virtual Asset Regulatory Authority as the statutory body responsible for licensing, regulating and supervising virtual asset activities, with immediate effect.
The central bank said its regulated entities, including commercial banks, may now open accounts for businesses licensed as Virtual Asset Service Providers (VASPs), subject to strict compliance with regulatory conditions and verification of licences issued by PVARA.
Under the framework, banks are required to maintain separate “client money accounts” for VASPs to handle authorised transactions.
These accounts must remain segregated from the firm’s own funds, with no commingling permitted. The accounts will be rupee-denominated, non-remunerative, and restricted solely to approved transactions.
The SBP also imposed strict operational limitations, including a ban on cash deposits and withdrawals in such accounts, and prohibited the use of client funds as collateral or for any credit facilities.
The law-activation aligns Pakistan with a growing number of jurisdictions introducing regulatory clarity for digital assets, amid increasing global adoption and scrutiny of the sector.
To mitigate financial crime risks, the central bank has mandated enhanced compliance under anti-money laundering frameworks. Regulated entities must conduct detailed due diligence on VASPs, including understanding their business models, customer base, onboarding processes and geographic exposure.
The SBP circular also requires the banks to update their risk assessment models to reflect the specific risks associated with virtual asset businesses and apply appropriate monitoring mechanisms.
Suspicious transactions must be reported to the Financial Monitoring Unit in accordance with the Anti-Money Laundering Act, 2010.
The SBP further allowed banks to open limited-purpose accounts for entities holding no-objection certificates from PVARA, enabling them to complete licensing requirements.
However, full transactional services related to virtual assets will only be permitted after formal licensing.
Importantly, the central bank clarified that regulated entities themselves are not permitted to invest in, trade, or hold virtual assets using either their own balance sheets or customer deposits, reinforcing a “cautious and controlled approach” to sector integration.
The SBP emphasised that all institutions must continue to comply with existing regulations, including foreign exchange rules, and that engagement with virtual asset firms does not absolve them of regulatory responsibility.
The introduction of the new legal framework is expected to provide regulatory certainty, encourage responsible innovation, and enhance oversight in Pakistan’s emerging digital asset ecosystem.
