The State Bank of Pakistan (SBP) has officially ended a seven-year prohibition on banking access for cryptocurrency firms, reversing a 2018 circular that barred regulated financial entities from dealing in virtual assets. The new directive, issued with immediate effect, authorizes banks, microfinance banks, and payment system operators to open accounts for entities holding a valid license from the Pakistan Virtual Asset Regulatory Authority (PVARA).
SBP Director Syed Mansoor Ali stated that the directive replaces the April 2018 circular, which explicitly prohibited processing, using, trading, holding, or transferring value in virtual currencies, including Bitcoin and Litecoin. Under the updated framework, banks may now open accounts for entities with a valid PVARA license or a No Objection Certificate obtained during the licensing process. Regulated entities are required to obtain and independently verify these licenses before onboarding clients, while adhering to enhanced customer due diligence under Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT), and Countering Proliferation Financing (CPF) regulations.
The central bank's circular mandates that banks establish segregated Client Money Accounts denominated in Pakistani rupees for the settlement of authorized Virtual Asset Service Provider (VASP) transactions. These accounts must remain non-remunerative, prohibit cash deposits and withdrawals, and cannot be used as collateral or security for financing. The rules further prohibit the commingling of client funds with VASP operational balances and explicitly bar banks from investing, trading, or holding virtual assets using proprietary funds or customer deposits.
Banks are also instructed to revise their customer risk profiling models to account for VASP exposure and apply ongoing monitoring and suspicious transaction reporting to Pakistan's Financial Monitoring Unit. This regulatory pivot follows the passage of the Virtual Assets Act, 2026, by Pakistan's parliament on March 6, which established PVARA as a statutory body. The Act introduced criminal penalties for unlicensed operations, including fines of up to PKR 50 million (approximately $179,000) and prison terms of up to five years.
This move is widely seen as a critical step toward integrating crypto assets into Pakistan's formal financial system, creating a more transparent and auditable structure for sector companies. While it grants VASPs crucial banking access, it maintains safeguards by preventing banks from direct crypto investment with customer funds, aiming to control systemic financial risks.
