State Bank of Pakistan Authorizes Bank Accounts for Licensed Virtual Asset Service Providers

This move integrates a previously underground market into the formal economy, potentially stabilizing financial flows and enhancing compliance.

• On April 14, 2026, the State Bank of Pakistan authorized banks to open accounts for licensed Virtual Asset Service Providers (VASPs), reversing a 2018 ban.
• This decision follows the enactment of the Virtual Assets Act, 2026, which established the Pakistan Virtual Asset Regulatory Authority (PVARA) for oversight.
• The regulatory shift aims to formalize an estimated 700% increase in underground crypto activity, serving over 20 million users.

• In 2018, the State Bank of Pakistan imposed a ban on virtual currencies due to concerns over money laundering and financial stability, leading to a surge in peer-to-peer crypto transactions.
• By early 2024, reliance on informal networks, such as 'Digital Hundi,' became prevalent, driven by economic pressures and high crypto adoption among the youth.
• The new regulatory framework aims to bring these activities into the light, ensuring compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) measures.

The State Bank of Pakistan's recent decision to authorize banks to open accounts for licensed Virtual Asset Service Providers (VASPs) marks a significant shift in the country's approach to cryptocurrency. This change comes after nearly eight years of stringent restrictions that stifled the formal crypto market, pushing users into underground networks. The 2018 ban was primarily motivated by concerns over money laundering and financial stability, but it inadvertently led to a dramatic increase in peer-to-peer crypto transactions, which surged over 700% by early 2024.

The enactment of the Virtual Assets Act, 2026, was a pivotal moment, establishing the Pakistan Virtual Asset Regulatory Authority (PVARA) to oversee and license VASPs. This regulatory body is tasked with ensuring that these entities comply with rigorous AML and CFT regulations, thereby integrating them into the formal banking system. The State Bank's Circular Letter No. 10 not only rescinds the previous ban but also mandates that banks conduct enhanced due diligence and ongoing monitoring of VASPs and their customers.

This regulatory shift is particularly relevant given the context of remittances, which are a vital source of income for many Pakistani families. With over 10 million expatriates sending money back home, the formalization of crypto channels could streamline these transactions, reducing reliance on high-risk informal networks. The potential for lower transaction costs and increased security in remittance flows could significantly benefit both senders and recipients.

Moreover, this move aligns Pakistan with global trends, as countries worldwide are increasingly recognizing the need to regulate cryptocurrencies. By establishing a framework for licensed VASPs, Pakistan is positioning itself to capitalize on the growing interest in digital assets while ensuring that financial stability is maintained. The integration of crypto into the formal banking system could also lead to increased investment in the sector, as more players enter the market with the assurance of regulatory oversight.

However, the transition will not be without challenges. Banks must quickly implement compliance frameworks to meet the new requirements, and the effectiveness of PVARA in regulating the sector will be closely scrutinized. Industry observers anticipate that this shift could formalize between $25 billion to $300 billion in previously informal crypto flows, potentially strengthening ties with major platforms like Binance.

• Crypto Users: Over 20 million individuals in Pakistan who have been using peer-to-peer networks will now have access to regulated services.
• Banks: SBP-regulated banks will need to adapt to new compliance requirements and potentially expand their service offerings.
• Expatriates: Pakistani expatriates, particularly in the UAE, will benefit from more secure and cost-effective remittance options.
• Investors: Those looking to invest in crypto-related ventures in Pakistan will find a more stable regulatory environment.

• Compliance Framework Implementation: Monitor how quickly and effectively banks establish compliance measures for VASPs, as this will determine the success of the new regulations.
• Market Response: Watch for shifts in crypto trading volumes and user engagement as the formal market opens up, indicating the level of trust in the new system.
• International Partnerships: Keep an eye on potential collaborations between Pakistani VASPs and global platforms, which could enhance the country's position in the crypto landscape.