Pakistan Legalizes Banking for Crypto Firms with Strict Rules Under New SBP Framework

In a landmark regulatory shift, the State Bank of Pakistan (SBP) has formally allowed banks and financial institutions to open accounts for licensed virtual asset companies and their customers. The move comes through BPRD Circular Letter No. 10 of 2026, issued following the enactment of the Virtual Assets Act, 2026.

This marks a decisive transition in Pakistan’s stance, from years of caution and informal restrictions to a structured and regulated digital asset ecosystem.

From Ban to Regulation: What Has Changed?

For years, Pakistan maintained a restrictive posture toward cryptocurrencies and virtual assets, primarily driven by concerns around money laundering, fraud, and lack of regulatory oversight. The earlier SBP circular from 2018 had effectively discouraged banks from engaging with crypto-related entities.

However, with the introduction of the new law and the establishment of the Pakistan Virtual Asset Regulatory Authority (PVARA), the country has now created a formal institutional framework to regulate the sector.

Under the new SBP circular:

• Banks can open accounts for PVARA-licensed Virtual Asset Service Providers (VASPs)
• Separate Client Money Accounts (CMAs) must be maintained for customer funds
• Strict segregation between company funds and customer assets is mandatory
• All transactions must comply with anti-money laundering and counter-terror financing regulations

This effectively integrates crypto-related businesses into the formal financial system, something that was previously not possible.

Strict Compliance Framework: No Free Pass for Crypto Firms

While the policy opens doors, it does not relax oversight. The SBP has imposed stringent compliance requirements to mitigate financial risks.

Banks must:

• Verify the authenticity of a VASP’s license directly with PVARA
• Conduct comprehensive due diligence on business models, customers, and geographic exposure
• Continuously monitor transactions and report suspicious activity under AML laws
• Update internal risk profiling systems to account for virtual asset risks

Importantly, the circular also prohibits banks from the following:

• Investing in or trading virtual assets using their own or customer funds
• Allowing cash deposits or withdrawals in designated crypto-related accounts
• Using customer funds as collateral for lending

This indicates a controlled approach, facilitating access without exposing the traditional banking system to undue risk.

Why This Matters: A Turning Point for Pakistan’s Digital Economy

The significance of this development goes beyond regulatory compliance. It lays the foundation for a formal digital asset economy in Pakistan.

1. Increased Investor Confidence
Regulatory clarity is often the biggest barrier for institutional investment. By defining rules and oversight mechanisms, Pakistan is signaling that it is open for responsible innovation.

2. Financial Inclusion and Innovation
Licensed crypto platforms can now operate transparently, potentially offering new financial services, especially in areas like remittances and cross-border payments.

3. Alignment with Global Trends
Countries worldwide are moving toward regulated crypto frameworks instead of outright bans. Pakistan’s shift aligns it with emerging global standards.

4. Reduced Informal Activity
A regulated environment could bring previously untracked crypto activity into the formal economy, improving transparency and tax potential.

A Coordinated Push Toward Regulation

This move reflects growing coordination between policymakers, regulators, and industry stakeholders. The creation of PVARA as a dedicated regulatory body indicates a long-term commitment to overseeing the sector rather than sidelining it.

Banks are also allowed to open limited-purpose accounts for companies seeking licenses, enabling them to complete regulatory requirements, a small but crucial step toward building a compliant ecosystem.

The Bigger Picture: Regulation Over Restriction

Pakistan’s latest move suggests a strategic shift in mindset, recognizing that virtual assets are not a passing trend but a growing component of the global financial system.

By allowing regulated access to banking while maintaining strict oversight, the country is attempting to strike a balance between innovation and financial stability.

If implemented effectively, this framework could transform Pakistan from a cautious observer into an active participant in the global digital asset economy, one that is regulated, transparent, and built for long-term growth.