State Bank of Pakistan Lifts 2018 Ban on Banking for Virtual Asset Service Providers

This policy change positions Pakistan to integrate its burgeoning crypto market into the formal economy, potentially enhancing financial stability and innovation.

• On April 14, 2026, the State Bank of Pakistan rescinded its 2018 ban on banking services for virtual asset service providers (VASPs).
• The new directive allows banks to open accounts for licensed VASPs under strict compliance measures, including anti-money laundering protocols.
• This shift aims to formalize the crypto sector, which has seen significant underground growth, with approximately 40 million Pakistanis now involved in crypto trading.

• In 2018, the State Bank of Pakistan imposed a ban on virtual currencies, citing risks to financial stability and illicit activities.
• By 2026, the underground crypto market had surged, with peer-to-peer trading volumes increasing over 700%, making Pakistan the third-largest retail crypto market globally.
• The Virtual Assets Act 2026 established the Pakistan Virtual Asset Regulatory Authority (PVARA) to oversee and license VASPs, reflecting a shift towards regulatory acceptance of digital currencies.

The State Bank of Pakistan's recent decision to authorize banking services for licensed virtual asset service providers marks a significant pivot in the country's approach to cryptocurrency. This change is rooted in the recognition of the substantial underground crypto activity that has flourished since the 2018 ban. With approximately 40 million Pakistanis now engaged in crypto trading—representing about 17% of the population—there is a clear demand for formalized services that can facilitate these transactions safely and efficiently.

The new framework, established under the Virtual Assets Act 2026, introduces stringent compliance measures aimed at mitigating risks associated with virtual currencies. Banks are now required to conduct enhanced due diligence, maintain segregated client money accounts, and adhere to anti-money laundering protocols. This regulatory oversight is designed to integrate crypto activities into the formal financial system, which could enhance transparency and reduce the risks of illicit activities that previously plagued the sector.

The decision to allow banks to service licensed VASPs is also a strategic response to economic pressures, particularly the need for more efficient remittance channels. With over 1.7 million Pakistani expatriates in the UAE sending approximately $35 billion annually back home, the formalization of crypto services could provide a cost-effective alternative to traditional remittance methods, which often rely on informal hawala networks. This shift not only benefits consumers by potentially lowering transaction costs but also positions Pakistan as a competitive player in the regional crypto landscape, particularly in relation to the UAE's pro-crypto ecosystem.

As the regulatory environment evolves, the focus will likely shift towards accelerating the licensing process for VASPs, with major players like Binance and HTX already advancing their applications. The enthusiasm surrounding this policy change is palpable, with stakeholders expressing optimism about the growth of the crypto ecosystem in Pakistan. This foundational step could pave the way for further innovations in financial technology and services, ultimately benefiting a broader segment of the population.

• Crypto traders: Increased access to banking services will streamline transactions and enhance security.
• Expatriates: More efficient remittance options could reduce costs and improve transaction times.
• Banks: New revenue streams from servicing VASPs and increased customer engagement in digital assets.
• Regulatory bodies: Enhanced oversight capabilities and a clearer framework for managing virtual assets.

• Licensing acceleration: Monitor how quickly the PVARA processes applications from VASPs, as this will indicate the pace of market integration.
• Market response: Watch for shifts in trading volumes and user engagement in crypto platforms as banking services become available.
• Regulatory developments: Keep an eye on potential adjustments to compliance measures as the market evolves and new challenges arise.