Pakistan opens banking channels for licensed crypto firms

Pakistan took a significant step toward formalising its digital-asset economy on Thursday as the State Bank of Pakistan allowed banks and other regulated financial institutions to open accounts for licensed virtual asset service providers. The move, brings crypto-related businesses into the country’s supervised banking system for the first time under a framework built around licensing, compliance and tighter financial oversight.

The decision follows the enactment of the Virtual Assets Act, 2026, under which the Pakistan Virtual Asset Regulatory Authority was created to license and oversee virtual-asset activity. Until now, the sector had operated in a grey area for years, with financial institutions largely discouraged from touching it. By shifting from broad restriction to controlled access, the authorities have signalled that Pakistan wants to regulate the space rather than leave it outside the formal economy.

Under the new arrangement, banks are not being given a free hand to onboard every digital-asset operator. The central bank has made verification a first requirement, meaning each institution must independently confirm that a provider holds a valid PVARA licence before offering services. The framework also creates a distinction between entities working under a no-objection certificate and those holding a full licence, with the latter eligible for broader banking access while the former are limited to narrower services.

The rules place special emphasis on protecting customer funds. Banks must open separate Pakistani-rupee client money accounts for transactions linked to licensed virtual-asset businesses, and those funds cannot be mixed with the providers’ own money or used as collateral. That requirement is designed to reduce the risk of misuse and to make the movement of customer funds easier to track, particularly in a market that has often drawn scrutiny over opacity and weak safeguards.

Officials also made clear that the opening of bank accounts does not amount to a relaxation of anti-money-laundering standards. Financial institutions will still be bound by existing counterterrorism financing rules, enhanced due diligence, risk profiling requirements and suspicious transaction reporting obligations to the Financial Monitoring Unit. In other words, Pakistan is trying to widen access without weakening the compliance architecture that international lenders and watchdogs have repeatedly urged it to strengthen.

The policy has been presented by regulators and sector stakeholders as a foundational reform. PVARA chairman Bilal bin Saqib said the framework would help move virtual assets into the formal financial system by pairing banking access with stronger oversight. Financial analyst Ibrahim Amin also described the decision as a potentially positive signal for capital inflows, arguing that bringing crypto investors and exchanges into documented banking channels could help keep more activity, and potentially more foreign currency, inside the local system.

The background to the change is important. In 2018, the central bank had instructed financial institutions to avoid dealing in virtual currencies and related services, effectively cutting the sector off from mainstream banking. That stance did not eliminate interest in digital assets among Pakistanis, but it did push much of the activity into less transparent channels. The latest circular effectively replaces that older approach with a supervised model in which participation is conditional on licensing, segregation of funds and traceable financial flows.

For Pakistan, the broader significance lies in the balance it is attempting to strike. The country wants to be seen as open to financial innovation, but it is also under pressure to maintain credibility on compliance, taxation and cross-border transaction monitoring. A regulated entry point for licensed virtual-asset firms could help authorities document a previously murky segment of the economy, encourage legitimate investment and reduce the risks associated with informal market activity.

The next phase will depend on implementation. Banks will need to decide how quickly they are prepared to service licensed providers, regulators will have to show that licensing standards are rigorous, and the market will be watching to see whether large players enter under the new rules. If the framework is enforced consistently, Pakistan may begin building a regulated digital-asset ecosystem; if oversight proves uneven, the policy could face the same credibility questions that have shadowed the sector for years.