Pakistan lifts 8-year ban on crypto

TLDR

Pakistans central bank has ended its long running banking ban on crypto firms and moved to a licensing based regulatory regime.

1. Banks can now open rupee client accounts for licensed virtual asset service providers but still cannot trade or hold crypto themselves.
2. This formalizes a huge gray market of tens of millions of users and could boost remittances, exchanges, mining and tokenization under stricter AML rules.
3. The impact now depends on how fast Pakistan licenses platforms, which firms are approved, and how tightly the rules are enforced in practice.

Deep Dive

1. What Exactly Has Changed

The State Bank of Pakistan (SBP) has issued BPRD Circular Letter No. 10 of 2026, reversing its 2018 directive that barred banks from servicing crypto businesses and replacing it with a regulated access model. Banks and other regulated institutions may now open accounts for virtual asset service providers licensed by the new Pakistan Virtual Assets Regulatory Authority (PVARA), created under the Virtual Assets Act 2026.

Under the circular, these accounts must be Pakistan rupee denominated client money accounts that are non interest bearing, cannot accept cash deposits or withdrawals, and must keep client funds fully segregated from the firms own funds. Banks remain explicitly prohibited from investing in, trading, or holding crypto with their own capital or customer deposits, so their role is fiat rails and custody of fiat balances, not direct exposure to digital assets.

2. Why It Matters For Crypto Users

Pakistan is already one of the worlds largest retail crypto markets, with estimates of roughly 20 to 40 million users and very high peer to peer and offshore exchange usage despite the prior banking prohibition. By allowing licensed firms to access local bank accounts, the government is trying to pull that activity into a supervised channel instead of leaving it entirely in informal markets.

The framework is heavily focused on compliance. Banks must verify PVARA licences, apply enhanced know your customer and anti money laundering checks, profile VASP risk, and report suspicious transactions to the Financial Monitoring Unit. For users, this could mean more reliable fiat on and off ramps, better consumer protections, and clearer rules around remittances and local trading, but also more identity checks and monitoring.

3. What To Watch Next

Several strategic initiatives are tied to this shift, including talks with large exchanges such as Binance and HTX about tokenizing state assets, expanding Bitcoin mining, and exploring a national stablecoin backed by government instruments. Which global and local platforms receive PVARA licences will determine where liquidity and users concentrate.

There are still meaningful constraints. Client money accounts are tightly controlled, and banks have zero room to speculate with crypto, which may limit how aggressive they are in supporting the sector. Implementation risk is high, given Pakistans large unbanked population and the possibility that heavy compliance burdens slow licensing or keep smaller startups out.

Conclusion

Pakistans move ends an eight year banking freeze on crypto firms and replaces it with a licensing and supervision regime that brings virtual assets into the formal financial system without putting bank balance sheets at risk. For a country that already ranks among the largest retail crypto markets, this pivot could unlock more legitimate volume, cleaner remittance channels, and institutional tokenization experiments, provided the new rules are implemented efficiently and do not get bogged down in bureaucracy.