Pakistan Lifts Crypto Banking Ban After 7 Years

Pakistan’s central bank now allows local financial institutions to open accounts for registered virtual asset service providers (VASPs) and their clients, according to a statement by the virtual asset regulator. With this move, the central bank has lifted a seven-year ban on cryptocurrency operations.

In 2018, the country banned all banks from providing their services to cryptocurrency businesses. But that ban has now been overruled, and the institutions are permitted to provide banking services to VASPs registered in the country.

With this change, the world’s fifth-most populous country aims to integrate digital assets into its regulated traditional financial system and facilitate their widespread adoption.

This big step comes just a month after the passage of the Virtual Assets Act, a regulatory framework that officially formalized Pakistan’s cryptocurrency sector by establishing the Pakistan Virtual Asset Regulatory Authority (PVARA).

Banks are now required to verify licenses issued by the newly established authority that governs crypto businesses before onboarding firms. 

Also, they must not commingle crypto clients’ funds with standard client accounts; instead, banks must keep these funds segregated and in Pakistani rupees, said the central bank.

The responsibility for due diligence will continue to lie with banks, along with risk profiling and reporting suspicious transactions to Pakistan’s Financial Intelligence Unit. So, they will conduct thorough checks on each of their new crypto clients, monitor them, and ensure they comply with anti-money laundering (AML) and counterterrorism financing regulations.

Furthermore, the role of lenders is limited to providing relevant services, and they are not allowed to trade in, invest in, or hold virtual assets using their own funds or customer deposits, according to the State Bank of Pakistan.

“This is a foundational step in bringing virtual assets ​into the formal financial system of Pakistan.”

– Bilal bin Saqib, the Chairman of the PVARA, said in the statement ​on Wednesday

Bin Saqib, who was previously the CEO of the Pakistan Crypto Council (PCC) and served as the special assistant to the prime minister on blockchain and crypto, has been the main force behind the efforts to make Pakistan a crypto hub.

Laying the Groundwork for a Policy Shift

The State Bank of Pakistan effectively shut the door on crypto during the 2018 bear market, and two bull cycles later, the rule has finally been rescinded. 

The pivot has actually come during yet another bear market, though the country has been engaged in policy discussions for some time now. So, while the state was discouraging crypto in practice, which didn’t eliminate usage completely but did push activity to informal peer-to-peer markets, it was exploring it in theory.

Between 2021 and 2024, authorities continued to issue warnings and even took enforcement actions. At one point during this period, there were even discussions about banning all cryptocurrencies.

So, there was no clear legal framework, and crypto existed in a grey zone. Despite the uncertainty and challenges, including weak infrastructure, high energy prices, and electricity shortages, adoption kept on growing.

Earlier this year, Pakistan’s VARA told Reuters that its large crypto market consists of an estimated 40 million users. Meanwhile, Bil Saqib said in an interview that “some 15 to 20 million Pakistanis hold crypto today” while processing “billions of US dollars in crypto transactions.”

The country, whose 60% of 250 million population is under the age of 30, ranks third in Chainalysis’ 2025 Global Crypto Adoption Index.

Pakistan actually climbed six spots to claim third place, behind only India and the US. The adoption has been driven largely by retail users and Pakistan’s strong remittance culture. The country receives a whopping $36 billion a year from overseas workers.

Amidst this adoption, the central bank once again clarified that virtual assets were not legal and advised financial institutions not to engage with them until a formal licensing framework has been established.

But before the year was over, the State Bank of Pakistan announced a package of policy proposals to legalize digital assets.

To support these efforts, Bin Saqib met with El Salvador’s President Nayib Bukele, who made Bitcoin (BTC ) a legal tender, and held a virtual discussion with Michael Saylor, whose company, Strategy (MSTR ), is the largest public holder of Bitcoin.

That’s not all. The chairman also met with Brandon Lutnick, the chairman and CEO of Cantor Fitzgerald, Robert “Bo” Hines, executive director of the US Council on Digital Assets, and former New York City Mayor Eric Adams.

Around this time, Saqib also revealed that Pakistan is looking into establishing a strategic Bitcoin reserve. He, at that time, said:

“From launching our Strategic Bitcoin Reserve to unlocking national infrastructure for crypto mining and AI data zones, Pakistan is building a real framework for digital asset adoption and economic modernization.” 

More importantly, the country made a real shift towards a pro-crypto environment as the government moved toward formalizing the sector.

In May, Pakistan’s Ministry of Finance endorsed the creation of a dedicated body to regulate crypto and “lead” the industry. 

A couple of months after that, the government launched PVARA to oversee the local crypto market. The statutory body is responsible for issuing licenses, setting AML rules, and ensuring compliance. Now, only firms with a valid PVARA license can access banking services under the new rules.

With this future-ready framework, whose approval was described by the country’s Ministry of Finance as “a critical inflexion point,” Pakistan was put “at the forefront of financial innovation.”

Pakistan then began inviting leading global crypto companies to participate in the country’s emerging digital economy.

PVARA called on leading crypto firms to submit Expressions of Interest (EoIs), which Bin Saqib, minister of state for crypto and blockchain, said will help build “a transparent and inclusive digital financial future for Pakistan.”

Positioning Pakistan as a Crypto Investment Hub

On one hand, the Pakistan government provided regulatory clarity through a comprehensive legal framework, and on the other hand, it started making inroads with some of the digital asset industry’s most powerful players.

In April last year, President Donald Trump-backed World Liberty Financial signed a Letter of Intent with PCC to accelerate crypto adoption in one of the industry’s fastest-growing markets by helping the Council launch regulatory sandboxes, expand stablecoin applications, explore real-world asset tokenization, and grow the DeFi market.

“Pakistan’s youth and technology sector are our greatest assets. Through partnerships like this, we are opening new doors for investment, innovation, and global leadership in the blockchain economy.”

– Finance Minister Muhammad Aurangzeb

Earlier this year, the country signed a memorandum of understanding (MOU) with SC Financial Technologies, an affiliate of World Liberty Financial, to explore digital finance innovation. The focus of the deal is on using stablecoins like USD1, the Trump family’s dollar-pegged stablecoin, to facilitate cross-border payments.

The agreement reflects “growing global interest in Pakistan as a key market for digital assets,” as the nation modernizes its payments system. 

Back in July, Governor Jameel Ahmad had shared that the country’s central bank had been preparing to launch a pilot for a digital currency. Meanwhile, Pakistan Banks Association (PBA) President Zafar Masud shared late last year that the nation is “seriously considering a rupee-backed stablecoin.”

Against that backdrop, the partnership is to help the country enable “dialogue and technical understanding around emerging digital payment architectures,” said PVARA in a statement. 

As per the MOU, USD1 will be integrated into a regulated payments framework, and it will operate alongside the country’s forthcoming digital currency infrastructure.

“Our focus is to stay ahead of the curve by engaging with credible global players, understanding new financial models, and ensuring that innovation, where explored, is ‌aligned with ‌regulation, stability, and national interest.”

– Aurangzeb

The MOU followed Zach Witkoff’s visit to Pakistan, shortly after which PVARA chairman Bin Saqib became an adviser to World Liberty Financial, but has reportedly “stepped down” since then. Witkoff is the CEO of SC Financial Technologies and the co-founder and chief executive of World Liberty Financial. 

The agreement, David Wachsman, spokesman for World Liberty Financial, told Reuters, could also “help ensure that the ⁠U.S. dollar will remain the world’s reserve currency. Pakistan will be exploring how a trusted, compliant U.S. dollar-denominated stablecoin would be used for digital payments and international remittances.”

The stablecoin USD1 has already been used in a $2 billion equity purchase at Binance by Abu Dhabi state‑backed investor MGX.

Pakistan itself has signed an MOU with the leading crypto exchange Binance in Dec. 2025, which also has ties to the Trump family, ​to ⁠explore tokenizing up to $2 billion in treasury bills, sovereign bonds, and commodity reserves, such as oil, gas, and metals owned by the government. 

Months before that, former Binance CEO Changpeng Zhao (CZ) joined the Pakistan Crypto Council as an adviser.

“We are sending a clear message to the world: Pakistan is open for innovation,” Aurangzeb said at the time. Calling Zhao’s appointment a “landmark moment,” the finance minister said CZ will help the country accelerate its vision to make the country “a regional powerhouse for Web3, digital finance, and blockchain-driven growth.”

Zhao is providing the government guidance on infrastructure, regulation, and adoption, and helped develop a “competitive crypto ecosystem.”

In an interview with PCC’s Bin Saqib, CZ said that a country with a population of 240 million could “move fast” with regulation, even with a “clear vision,” making Pakistan a world leader in crypto by 2030.

The same month the MOU with Binance was signed, the exchange received a no‑objection certificate (NOC) to operate in the country. HTX was also granted initial clearances for licensing as officials began efforts to attract regulated exchanges.

As Pakistan ramped up efforts to establish itself as a crypto-friendly economy, the government announced plans to allocate 2 GW of surplus electricity to Bitcoin mining and AI data centers. 

This particular initiative was driven by the PCC with the aim of attracting foreign investment, which was down 45% in Feb. 2025 compared to the prior year, as well as generating revenue and creating high-tech jobs. That’s just the first phase, which will follow the introduction of access to renewable energy for mining operations.

Then, last month, the Virtual Assets Act was passed, creating a formal legal structure for crypto in Pakistan for the first time. 

The Act cemented PVARA’s role as the country’s digital asset regulator, “moving toward a comprehensive licensing framework aligned with global AML and financial integrity standards.”

A Global Push to Balance Innovation With Financial Stability

First with the Virtual Assets Act and now allowing banks to serve crypto firms, Pakistan has made major progress in line with the evolving global regulatory landscape. 

While concerns about crypto’s use in money laundering and terrorism financing had long restricted regulatory clarity, the stance toward crypto began to soften in the last few years as policymakers realized that banning crypto outright was not only impractical but also economically limiting. 

This led governments to start building regulatory frameworks, with a focus on AML compliance, licensing exchanges, and understanding just how existing financial laws might apply. And as crypto regulation entered a more mature phase, regulators began examining how it can coexist with traditional systems. 

This resulted in developments like spot Bitcoin ETFs, stablecoin regulation, and serious discussions about tokenizing real-world assets. Now, governments and financial institutions are actively building infrastructure around crypto. So far this year, crypto regulation has made a lot of progress worldwide. 

This includes a new task force unveiled by the US Commodity Futures Trading Commission (CFTC) that will help it create clear rules within U.S. derivatives markets for those building in crypto, prediction markets, AI, and autonomous systems.

“By establishing a clear regulatory framework for innovators building on the new frontier of finance, we can foster responsible innovation at home and ensure American market participants are not left on the sidelines.”

– CFTC Chairman Michael Selig said in a statement

Then, earlier this month, the FDIC shared the proposed rules to implement the GENIUS Act. The rules create a framework, covering capital requirements, redemption procedure, guidelines for reserve assets, and risk management for supervised stablecoin issuers.

Stablecoins, however, won’t get the same protections as traditional bank accounts, as evident from a key provision that excludes stablecoins from deposit insurance protections. 

As per the proposal, issuers must redeem tokens within two business days, and they can’t claim that their tokens produce yield, even through third parties. 

While the US is promoting stablecoin integration into traditional banking systems, the International Monetary Fund (IMF) has warned that, as they scale, stablecoins can face confidence-driven runs.

Tokenization, as the agency notes, “constitutes a structural reallocation of trust within the financial system.” The paper points out that by eliminating the delays that allow traditional financial systems to step in before problems spread, tokenization is leading to the problem of instant materialization of liquidity crises. 

In the report, Tobias Adrian, financial counselor and director of the monetary and capital markets department of the IMF, outlined a five-pillar policy roadmap and called on governments to anchor tokenized settlement in safe assets, apply consistent regulation, and adapt their liquidity tools to operate automated environments. Legal mandates financial stability; the report states that “must ultimately prevail over automated execution.”

Meanwhile, in the UK, the Financial Conduct Authority (FCA) is still working on proposals to govern how crypto firms conduct standards and regulatory oversight, as part of the agency’s wider crypto roadmap to bring crypto entirely within the regulatory perimeter and align its treatment more closely with traditional financial services.

“These proposals continue our progress towards an open, sustainable, and competitive crypto market that people can trust,” said the regulator, adding, “We want a market where innovation can thrive, but where people understand the risks.”

Australia’s financial services regulator has also made providing clarity on licensing requirements and perimeter oversight its main priorities for this year. It is currently working on a comprehensive licensing legislation to address regulatory gaps. 

Elsewhere in Asia, Thailand is now permitting crypto to be used as underlying instruments for regulated derivatives products. The SEC also said that follow-up rules will be drafted to change derivatives licenses so crypto operators can offer crypto-linked contracts.

With this latest development, the regulator aims to “promote more inclusive market growth, facilitate diversification and more effective risk management, and expand investment opportunities for a broader range of investors.”

Conclusion

By lifting its crypto banking ban after seven years, Pakistan has made a major policy reversal that signals a strategic shift toward embracing financial innovation while maintaining regulatory control. 

After years of uncertainty, the country has been making decisive moves to formalize a rapidly growing sector. By combining licensing frameworks, strict compliance requirements, and global partnerships, Pakistan is attempting to strike a balance between opportunity and risk. 

With this move, the South Asian country is finally integrating digital assets into the traditional financial system, but success will depend on execution, infrastructure challenges, regulatory enforcement, and market volatility, which continue to present key hurdles. But if managed effectively, Pakistan’s approach could serve as a blueprint for other emerging markets navigating the transition from crypto skepticism to structured adoption.