Pakistan Removes Seven-Year Restriction, Enabling Banks to Support Cryptocurrency Providers

The State Bank of Pakistan has notified all banks and financial institutions that the prohibition on providing cryptocurrency services has been lifted. However, according to new regulations, banks are barred from using their own funds or customer deposits to invest in, trade, or hold cryptocurrency assets. This move follows the recent implementation of the 2026 Virtual Assets Act, which established the Pakistan Virtual Asset Regulatory Authority (PVARA) to oversee the sector. The central bank has replaced its 2018 cryptocurrency ban with new rules allowing regulated banks and financial institutions to open accounts for cryptocurrency firms approved by PVARA. Under the new framework, banks can provide services to virtual asset service providers (VASPs) licensed under the new cryptocurrency act, as well as to those seeking approval, provided they adhere to strict anti-money laundering (AML), know-your-customer (KYC), and counter-terrorism financing regulations. The State Bank of Pakistan stated that, subject to strict compliance with the outlined conditions, regulated entities may open bank accounts for entities licensed by PVARA as virtual asset service providers. The central bank's rules also outline detailed conditions for onboarding cryptocurrency firms, including mandatory license verification, enhanced due diligence, and ongoing supervision of all transactions. In December, the Pakistani government and Binance signed a memorandum of understanding (MOU) to explore the tokenization of up to $2 billion in bonds, treasury bills, and commodity reserves. The same month, the Chairman of Pakistan's Virtual Assets Regulatory Authority announced plans to accelerate cryptocurrency adoption, leverage Bitcoin mining, and launch a national stablecoin. Approximately 40 million people, or 17% of the Pakistani population, are involved in cryptocurrency trading, according to the government.