Pakistan ends crypto banking ban, opens door to regulated digital asset market

LAHORE: Pakistan has ended an eight-year ban that kept cryptocurrency firms out of the banking system, allowing lenders to work with the sector under a tightly controlled framework.

The State Bank of Pakistan (SBP) said in a circular dated April 14 that banks can open accounts for virtual asset companies licensed by the Pakistan Virtual Assets Regulatory Authority (PVARA), a body set up under the Virtual Assets Act passed in March. 

The move marks the country’s first formal step toward bringing crypto activity into the regulated financial system since restrictions imposed in 2018.

Access is limited to firms approved by the regulator. Companies holding only a no-objection certificate can open restricted accounts, while full transaction services are allowed only after a license is granted. 

Banks must verify each firm’s regulatory status before onboarding.The central bank kept strict limits on lenders’ role. Banks are not allowed to trade, invest in, or hold cryptocurrencies, either for themselves or on behalf of customers. 

Their function is limited to providing accounts and payment services. The rules also require crypto firms to keep customer funds separate from their own. 

Due diligence

These balances must be held in non-interest accounts in Pakistani rupees and can only be used to settle approved transactions. Cash deposits and withdrawals are not permitted, and the funds cannot be used as collateral.

Banks must carry out full due diligence on each client and monitor transactions on an ongoing basis. Suspicious activity must be reported under existing anti-money laundering laws, extending current financial controls to the crypto sector.

The policy shift follows rapid growth in crypto use despite the earlier ban. Pakistan ranked among the top countries in Chainalysis’ 2025 Global Crypto Adoption Index, reflecting demand for remittances, access to dollar-linked assets and wider use of mobile financial services. 

Industry estimates cited by officials put the number of users at more than 40 million, with annual trading volumes approaching $300 billion, much of it outside formal oversight

Landmark moment

Speaking to Pakistan TV Digital, the PVARA chairman said “This is a landmark moment. For eight years, a blanket prohibition cut Pakistan off from a financial innovation that the rest of the world was building infrastructure around. What SBP has done today is not just lift a ban. It is a formal acknowledgment that virtual assets are a legitimate part of Pakistan's financial system. That acknowledgment carries institutional weight.”

The timing matters too, he noted adding that “The Virtual Assets Act 2026 created the legal foundation; PVARA is the regulatory authority; and now the SBP has opened the banking system to PVARA licensed operators. These three pieces together mean Pakistan has moved from prohibition to a complete, functioning framework in a single legislative cycle. That is not a small thing.”

“The most immediate impact is legitimacy. Exchanges operating in Pakistan have functioned in a grey zone, compliant with nothing because there was nothing to comply with. That changes now. A licensed VASP with a bank account is a regulated entity, subject to AML checks, transaction monitoring, and SBP oversight. That protects consumers and brings activity into the formal economy,” he said, while highlighting the positive impact of the move.

The second impact is remittances, Bilal added, noting that “Pakistan receives over $38 billion annually from its diaspora. A meaningful share moves through informal channels because the formal ones are slow and expensive. Licensed exchanges with banking access can now offer a legal, fast, low-cost alternative. That is real money entering the documented economy.”

The third he mentioned is the investor confidence. “Any serious crypto business evaluating Pakistan will look at banking access as a baseline requirement. We now meet that bar,” he said.

Authorities have moved in stages toward regulation. The government launched PVARA as an interim body in July 2025 before giving it statutory status through legislation this year. 

Use of digital assets

The regulator has already issued no-objection certificates to some exchanges as part of a phased licensing process.

The banking decision comes alongside broader plans to expand the use of digital assets. 

The government has already moved to bring in global crypto players, signing a memorandum of understanding with Binance in December to ⁠explore tokenising up to $2 billion in assets and granting initial clearances to Binance and HTX to begin licensing.

Pilot programs using dollar-backed stablecoins for remittances are under way, and work on a central bank digital currency is in progress. 

Officials have also outlined plans to direct surplus electricity to bitcoin mining and artificial intelligence data centers.

Crypto businesses in Pakistan

Crypto businesses in Pakistan too see this as a lifeline. Access to banking means they can operate more like normal companies. 

They can pay rent, hire staff with direct deposit, accept payments from customers without complicated workarounds. Investment could pick up. 

International crypto firms that avoided Pakistan because of the banking ban might reconsider.

Local startups that struggled to raise money might find it easier to attract capital now that they can manage funds through legitimate bank accounts.

But the impact won’t be instant. Banks need time to build out their processes. VASPs need time to get their licenses in order. 

The whole ecosystem has to shake off years of operating in the shadows.

Consumer trust is another factor. Pakistanis who wanted to buy crypto but felt nervous about unregulated exchanges might feel safer now. 

Banking integration adds a layer of legitimacy that was missing before. That could bring new users into the market.

Infrastructure development will probably accelerate. With banking access, crypto companies can invest in better platforms, customer service, security systems. 

The ban forced them to run lean and scrappy. Now they can build something more robust.

The latest move signals a shift from restriction to oversight, as authorities seek to bring a large, informal crypto market into the formal financial system without exposing banks directly to digital asset risks.