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

The State Bank of Pakistan has notified all financial institutions in the country that they are now permitted to provide services to cryptocurrency firms, following the lifting of a seven-year ban. However, the new regulations stipulate that banks are not allowed to use their own funds or customer deposits to invest in, trade, or hold cryptocurrency assets. This development comes after the recent introduction of the 2026 Virtual Assets Act, which established the Pakistan Virtual Asset Regulatory Authority (PVARA) to oversee and regulate the sector. The central bank has replaced its 2018 ban on cryptocurrency with new rules, allowing regulated banks and financial institutions to open accounts for cryptocurrency companies that have been approved by PVARA. Under the new framework, banks can provide services to licensed virtual asset service providers (VASPs) and 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, "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 a recent development, 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. Additionally, the Chairman of Pakistan's Virtual Assets Regulatory Authority, Bilal Bin Saqib, announced plans to accelerate cryptocurrency adoption, leverage Bitcoin mining, and launch a national stablecoin. According to the government, approximately 40 million people, or around 17% of the Pakistani population, are involved in cryptocurrency trading, making the country the third-largest crypto market by retail activity.