Pakistan has officially ended its long-standing freeze on the digital currency sector by allowing banks to facilitate licensed virtual asset providers. Summary Pakistan’s central bank has ended an eight-year ban on virtual currencies by allowing banks to open accounts for licensed digital asset service providers. The State Bank of Pakistan requires strict segregation of funds through Client Money Accounts to prevent the commingling of customer assets with company funds. Financial institutions must perform enhanced due diligence and update their risk models to comply with anti-money laundering and counter terrorism financing rules. The State Bank of Pakistan (SBP) issued a circular on April 14 authorizing regulated financial institutions to open accounts for entities registered with the Pakistan Virtual Assets Regulatory Authority (PVARA). This move follows the landmark passage of the Virtual Assets Act 2026 last month, effectively dismantling a restrictive environment that had been in place since an outright ban was imposed in 2018. New financial guardrails for crypto State Bank officials clarified that while banks can now service the industry, they are strictly prohibited from using their own capital or customer deposits to trade, hold, or invest in virtual assets. The central bank’s directive emphasizes that the role of traditional lenders is limited to providing an interface for licensed firms rather than participating in the market themselves. To ensure the safety of public funds, the SBP has mandated the use of Client Money Accounts (CMAs). These Pakistan Rupee-denominated accounts must remain entirely separate from a service provider’s own operational funds to prevent commingling. Further, to maintain a clear boundary, the SBP noted that “any arrangement with a VASP does not absolve them” of existing obligations, including foreign exchange and anti-money laundering rules. Banks also remain tied to existing foreign exchange protocols, as the circular notes that “any arrangement with a VASP does not absolve them of those obligations.” Financial institutions must also update their internal risk models to specifically address the volatility and transparency challenges associated with digital assets. Under the new guidelines, banks are required to perform exhaustive due diligence on every licensed provider, including verifying their PVARA credentials and maintaining “ongoing monitoring” of these relationships. Any activity flagged as suspicious under anti-money laundering or counter-terrorism financing rules must be reported immediately to Pakistan’s Financial Monitoring Unit. The regulatory pivot comes after a period of intense groundwork, including high-level consultations with global exchanges like Binance and HTX in late 2025. These discussions focused on attracting regulated trading platforms to a market that already boasts tens of millions of users. Beyond retail trading, the government has been investigating blockchain-integrated infrastructure through engagements with affiliates of World Liberty Financial, specifically looking at the potential for stablecoins to streamline cross-border payment systems.
