Pakistan has taken a major step toward regulating digital finance after the State Bank of Pakistan (SBP) formally introduced the Virtual Assets Act 2026, officially permitting and promoting the controlled use of virtual assets in the country.

Under the new legislation, authorities have established the Pakistan Virtual Asset Regulatory Authority (PVARA), which will serve as the country’s dedicated regulator for the crypto and digital asset ecosystem. The body will oversee licensing, supervision, compliance, and enforcement for all virtual asset activities operating within Pakistan.

The law creates Pakistan’s first comprehensive legal structure for cryptocurrency businesses and blockchain-based financial services. Following the announcement, the central bank confirmed that regulated financial institutions, including commercial banks, are now allowed to provide banking services to companies approved as Virtual Asset Service Providers (VASPs) by PVARA.

As a result, licensed crypto exchanges, digital wallets, asset platforms, and fintech firms can gain access to Pakistan’s formal banking network, subject to strict regulatory compliance. Banks have been instructed to verify each VASP’s regulatory license before onboarding and must maintain separate accounts specifically designated for customer funds.

These accounts will operate in Pakistani rupees, remain non-interest bearing, and will not permit cash deposits or withdrawals. The SBP has also introduced stringent anti-money laundering safeguards, requiring banks to carry out enhanced due diligence, closely monitor customer activity, assess risk exposure, and report suspicious transactions under existing financial crime regulations.

Importantly, banks themselves are prohibited from investing in, trading, or holding virtual assets using either institutional funds or customer deposits. The framework therefore focuses on enabling regulated access, payments, custody services, and infrastructure support rather than allowing financial institutions to directly speculate in cryptocurrencies.

Pakistan had previously maintained tight restrictions on crypto-related activities, with most digital asset businesses excluded from traditional banking channels. The new regulatory framework signals a clear policy shift toward supervised adoption of digital assets and blockchain innovation while maintaining strict financial oversight and compliance controls.