Unlocking the crypto ecosystem

“For much of the past year, Pakistan’s crypto journey has been in full throttle and no short of main character energy. A council followed by an ordinance, which eventually gave way to an Act, along with the creation of a new regulator for virtual assets, with two exchanges — Binance and HTX — even getting the no-objection certificates. Monumental as these measures were, the biggest story was perhaps on the political front, partly if not fully. A lot of ‘analysis’ has been churned on that, telling us that Pakistan’s newfound love for crypto was a trick to get cosy with Washington, specifically the Trump family, which reaped dividends in the form of Islamabad Talks . While there may be a degree of truth there, it serves little purpose to pontificate on such matters. Throughout this push, the more interesting question was the execution and regulatory structure, especially with regard to payments. After all, ever since the State Bank of Pakistan’s (SBP) famous 2018 circular that barred regulated financial institutions from deal in virtual currencies, crypto essentially operated and thrived in the grey market. And the SBP was taking its sweet time deliberating on stuff, whether the on- and off-ramp technicalities or its implications on capital controls, aka Foreign Exchange Regulation, which supersedes the Virtual Assets Act. While the latter is too difficult a terrain to navigate here, it finally moved the needle on crypto’s access to banks. Trade execution remains inside the supervised intermediary; fiat entry and exit become visible at the banking layer, allowing for a better audit trail The SBP’s Banking Policy & Regulations Department (BPRD) Circular, at last, replaced the prohibition put in place in 2018 and issued high-level protocols. A virtual firm seeking banking access must first obtain a Pakistan Virtual Assets Regulatory Authority (PVARA) no-objection certificate, after which it can proceed with anti-money laundering registration, local incorporation, and a limited-purpose account for completing the remaining formalities. Full transactional banking only begins after PVARA issues a complete licence and the bank independently verifies that status. Needless to say, the bank must conduct enhanced due diligence and recalibrate its customer risk model. Before getting into the nitty gritty, it is worth recalling why banking access mattered so much in the first place. Until recently, buying or selling crypto meant looking for peer-to-peer (P2P) merchants on exchanges, which created friction in the process and, occasionally, even led to raids by law enforcement agencies. This also meant that the regulatory bodies had no proper audit trail to determine the extent of virtual asset adoption in Pakistan, pushing everyone to rely on the hackneyed Chainalysis adoption index. The structural centrepiece of the circular is the client money account, or CMA — a segregated, rupee-denominated account that holds customer funds ring-fenced from the virtual asset service provider’s (VASP) own capital. It earns no interest, cannot be pledged as collateral, and sits outside the scope of ordinary cash handling. Let’s suppose you are looking to buy crypto — you open your VASP app, find the asset you want, and the first thing you encounter is a choice of trading pair. If the platform offers a direct crypto/rupee pair, you pay more in spreads, and your options for smaller altcoins may be limited. The more popular stablecoin route — converting your rupees into USDT or USDC first — can get you better pricing and deeper liquidity, but adds a step. Once you confirm the order, you will need to make the payment, which can be made against the exchange’s IBAN number, quite like how things work with brokerages. Now, depending on whether product integrations shape out or not, this can be through a fund transfer or a direct debit from your account. When the money lands with VASP, it can reconcile the amount against your unique identifier — the CNIC number, registered IBAN or something else — and execute the purchase. The crypto shows up in your wallet. So while the payment rails will remain the same as before, the bank and exchange have better visibility now as your rupees sit in a ring-fenced account. The sell flow works similarly. When a customer sells a virtual asset, the VASP records rupee proceeds on its internal ledger. The customer may leave those proceeds sitting inside the app wallet — and frequently will. Only when they choose to withdraw does the CMA-based banking workflow activate, with the VASP instructing its partner bank to remit funds to the customer’s personal account. Trade execution remains inside the supervised intermediary; fiat entry and exit become visible at the banking layer. For regulators, that separation provides a cleaner audit trail than anything the grey market ever could. It would be interesting to see what the change means for P2P merchants, who for long have operated as currency exchanges. Licensed VASPs can pre-fund liquidity pools on their own through institutional contracts, thus denting the grey market. Nevertheless, there are potential openings for regulated intermediaries: liquidity providers, broker-style firms, and existing money changers, depending on how PVARA defines its licence categories in practice. As of today, those details are still few. PVARA itself is barely eight months old and in the process of building the regulatory infrastructure and capacity. For its part, the SBP hasn’t yet publicly specified the rules for customer due diligence or anti-money laundering either. But let’s not get ahead of ourselves, for years of inaction can’t be changed within days. The writer is the co-founder of Data Darbar and Head of Insight Lab at KSBL. Published in Dawn, The Business and Finance Weekly, April 27th, 2026

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