Pakistan has officially incorporated virtual assets into its legal framework, marking a significant transformation in the country’s financial policy. The State Bank of Pakistan (SBP) announced the enactment of the Virtual Assets Act 2026, which introduces comprehensive regulation for digital assets.
In a notable development, the new legislation establishes the Pakistan Virtual Asset Regulatory Authority (PVARA), a specialized body responsible for licensing, compliance, and supervision of businesses operating in the virtual asset space. This step reflects the government’s commitment to legitimizing and regulating the sector while ensuring robust financial safeguards.
Under the Act, banks and other regulated financial institutions are now permitted to offer services to companies registered as Virtual Asset Service Providers (VASPs), provided they verify these entities’ licenses through PVARA. These institutions must maintain thorough records and ensure all transactions adhere strictly to regulatory standards.
To enhance financial transparency, banks are required to open separate rupee-denominated client money accounts exclusively for VASPs. These accounts are designated solely for transaction settlements and are subject to stringent restrictions: cash deposits or withdrawals are prohibited, profit payments are disallowed, and funds cannot be used as collateral. Furthermore, VASP funds must be kept entirely separate from client holdings to prevent any misuse.
The SBP has emphasized rigorous compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. Financial institutions must perform enhanced due diligence on VASPs, evaluate their business models, and continuously monitor transactions. Any suspicious activities must be reported in accordance with existing legal frameworks.
While banks may assist VASPs in obtaining licenses through limited-purpose accounts, they are barred from directly investing in or trading virtual assets using their own or customers’ funds. They remain fully responsible for complying with all applicable financial and foreign exchange regulations.
Overall, the Virtual Assets Act 2026 introduces a carefully controlled mechanism for integrating virtual assets into Pakistan’s financial system, balancing innovation with stringent regulatory oversight to safeguard the economy.
