Pakistan ends 2018 crypto ban; banks can serve licensed VASPs

The State Bank of Pakistan has lifted a seven-year restriction on banking services for crypto firms, replacing an April 2018 circular that barred regulated entities from processing, trading, holding or transferring value in virtual currencies. The directive, effective immediately, allows banks, microfinance banks and payment system operators to open segregated Pakistani rupee accounts for virtual asset service providers that hold a valid license from the Pakistan Virtual Asset Regulatory Authority (PVARA).

Under the new rules, banks may onboard entities that present a valid PVARA license or a No Objection Certificate while a license application is pending. The central bank requires regulated firms to independently verify licensing status before opening accounts and to apply enhanced customer due diligence consistent with anti-money laundering, countering the financing of terrorism and countering proliferation financing rules.

Banks must open segregated client money accounts denominated in Pakistani rupees for settlement of authorized VASP transactions. Those accounts must be non-remunerative, cannot accept cash deposits or permit cash withdrawals, and are prohibited from serving as collateral or security for financing.

The guidance bars commingling of client funds with VASP operational balances and prevents banks from using their own funds or customer deposits to invest in, trade or hold virtual assets. Lenders and payment operators are required to adjust customer risk-profiling models to reflect exposure to VASPs, implement ongoing transaction monitoring and report suspicious activity to the Financial Monitoring Unit.

The directive follows the Virtual Assets Act, 2026, passed on March 6, which established PVARA as a statutory regulator and introduced criminal penalties for unlicensed operations, including fines of up to PKR 50 million and prison terms of up to five years.

The circular, issued by SBP Director Syed Mansoor Ali, replaces the 2018 prohibition and sets out operational and compliance limits for banks working with licensed virtual asset service providers. The circular notes the requirements are effective immediately.