Pakistan Ends Seven-Year Crypto Ban, Opens Banking Rails for Licensed Providers

Pakistan has officially reversed a seven-year prohibition on banking services for the cryptocurrency sector, marking a strategic shift toward the formalization of digital assets. The State Bank of Pakistan (SBP) notified financial institutions that they may now open accounts for Virtual Asset Service Providers (VASPs) that are licensed or seeking approval from the newly established Pakistan Virtual Asset Regulatory Authority (PVARA). This policy pivot follows the passage of the 2026 Virtual Assets Act, which creates a comprehensive legal framework for the licensing and supervision of the industry. The move aims to integrate a massive existing retail market into the formal financial system, as government data indicates approximately 40 million citizens—roughly 17% of the population—are already engaged in crypto trading. Despite the opening of banking rails, the SBP has maintained strict boundaries to protect institutional stability. Banks are explicitly forbidden from using their own capital or customer deposits to invest in, trade, or hold crypto assets. All onboarding processes for VASPs must adhere to rigorous anti-money laundering (AML) and know-your-customer (KYC) protocols, alongside enhanced due diligence and ongoing transaction supervision. The regulatory shift aligns with broader ambitions to modernize Pakistan's financial infrastructure. This includes a memorandum of understanding with Binance to explore the tokenization of up to $2 billion in commodity reserves, treasury bills, and bonds. Additionally, officials have signaled plans to accelerate crypto adoption through Bitcoin mining and the potential launch of a national stablecoin. By legitimizing the operational side of crypto firms, Pakistan seeks to capture tax revenue and reduce illicit flows in what is currently the world's third-largest retail crypto market by activity, surpassing nations such as Germany and Japan.