Pakistan Plans Crypto Comeback as Banking Doors Reopen After 7-Year Freeze

The State Bank of Pakistan has reversed its long-standing restrictions on the crypto sector, reopening the country’s banking system to licensed virtual asset firms after nearly seven years.

The move replaces a 2018 directive that had effectively cut off crypto-related businesses from formal financial services. With immediate effect, banks, microfinance institutions, and payment operators are now permitted to onboard companies that hold authorization from the newly established Pakistan Virtual Asset Regulatory Authority.

According to central bank official Syed Mansoor Ali, the updated framework dismantles the earlier blanket ban, which had prohibited financial institutions from facilitating activities tied to digital assets like Bitcoin and Litecoin.

Under the new rules, financial institutions can open accounts for firms that either possess a full license or are in the process of securing one, provided they have received a No Objection Certificate. However, onboarding comes with stringent obligations: banks must independently verify licenses and apply enhanced compliance checks aligned with anti-money laundering and counter-terror financing standards.

The directive also introduces strict operational controls. Banks are required to create segregated client money accounts in Pakistani rupees specifically for crypto-related transactions. These accounts cannot generate interest, accept cash deposits, or be used as collateral—ensuring that customer funds remain isolated and protected.

Additionally, financial institutions are prohibited from mixing client funds with operational balances or engaging in crypto trading using their own capital or customer deposits. Risk monitoring has also been tightened, with banks expected to update their profiling systems to reflect exposure to virtual asset service providers and report suspicious activity to regulators.

This regulatory pivot follows the passage of the Virtual Assets Act, 2026, enacted on March 6, which formally established the oversight authority. The law introduces tough penalties for unlicensed crypto operations, including fines of up to PKR 50 million and prison sentences of up to five years.

Together, these changes signal Pakistan’s transition from outright restriction to controlled adoption—opening the door for institutional crypto growth under a tightly regulated framework.