Virtual Assets and Cryptocurrencies in Pakistan: Legal Framework, and Digital Economy Risks

Abstract

The virtual assets regulation in Pakistan has transitioned from the informal ban to a systematic control from 2025 to 2026. The new regulatory framework of Virtual Assets Act 2026 is based on the Pakistan Virtual Assets Regulatory Authority (PVARA), the separation of jurisdictional roles of small and big banks between the State Bank of Pakistan and the Securities and Exchange Commission of Pakistan, the FATF-compliant Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) framework, and the simultaneous creation of a central bank digital currency. Current study explores the legal development of the virtual asset’s regulation in Pakistan, the prohibitory circular of the State Bank of Pakistan of 2018 and the enactment of the Virtual Assets Ordinance 2025 leading to the Virtual Assets Act 2026. The unresolved policy issues like regulatory uncertainty between the two authorities, capital requirements which can bar local innovators, procedural inadequacies in lawmaking via presidential ordinance, constitutional problems in regulatory overreach, data privacy issue in the absence of a broad-based data protection law, enforcement capacity issues, and the unsolved problem of Shariah compliance in a Muslim-majority country have also been discussed. Comparative analysis with South Asian jurisdictions, especially with the taxation-intensive policy in India and the fact that Bangladesh has not yet legalized its virtual assets system, the author argues that for an effective regulation, Pakistan should demarcate its jurisdiction, implement a comprehensive licensing system, have an effective parliamentary control, and come up with Shariah-compliant virtual assets laws.