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Pakistan Enacts First Virtual Assets Law to Regulate Crypto Sector
Pakistan has taken a significant step in the realm of digital finance by formally enacting its first law to regulate virtual assets. This development marks a pivotal moment for the country as it aligns itself with global trends in blockchain-based financial oversight. The new legislation, known as the Virtual Assets Act, 2025, introduces a federal authority tasked with licensing and monitoring crypto-related businesses, ensuring compliance with international anti-money laundering (AML) standards, and fostering innovation through regulatory sandboxes.
The establishment of the Pakistan Virtual Asset Regulatory Authority (PVARA) is a key component of this law. As an autonomous regulator, PVARA will oversee the virtual asset economy, ensuring transparency, financial integrity, and the prevention of illicit activities. This initiative is part of a broader movement among nations like the United Arab Emirates, Singapore, India, and the European Union, which have also introduced frameworks for crypto regulation, including licensing systems and pilot programs for central bank digital currencies (CBDCs).
In addition to the new regulatory body, the State Bank of Pakistan has announced plans to launch a pilot program for a digital rupee. This move reflects a growing commitment to modernizing Pakistan’s financial infrastructure and embracing digital solutions.
Key Provisions of the Virtual Assets Act
The Virtual Assets Act grants PVARA extensive powers to ensure that all entities operating in the virtual asset space meet operational and compliance standards. These include:
- A structured licensing regime for firms offering services related to cryptocurrencies, digital tokens, and blockchain-based assets.
- Ongoing reporting obligations for licensed entities.
- Measures to combat illicit finance and enforce transparency, in line with the Financial Action Task Force (FATF) framework.
The law also emphasizes the importance of international standards, particularly those set by the FATF. Pakistan was removed from the FATF grey list in 2022 following significant reforms, making adherence to these standards crucial for maintaining regulatory credibility.
Governance and Expertise
The governing board of PVARA will consist of high-ranking officials from various economic and regulatory institutions, including the governor of the State Bank of Pakistan, secretaries of finance, law, IT, and telecom, as well as chairpersons of key regulatory bodies. Two independent directors with expertise in law, technology, or finance will be appointed by the federal government to provide additional guidance.
The chairperson of PVARA will be selected based on demonstrated experience in finance, law, technology, or regulatory affairs. This ensures that the leadership of the authority is both qualified and capable of managing the complexities of the virtual asset sector.
Islamic Considerations and Dispute Resolution
Recognizing the unique context of Pakistan’s financial system, the law mandates the creation of a Shariah Advisory Committee. This committee will advise PVARA on the religious permissibility of virtual asset products and services. Any firm offering Shariah-compliant services must adhere to the committee’s rulings, ensuring that the regulation respects cultural and religious values.
To address disputes, the law establishes a Virtual Assets Appellate Tribunal. This independent body will include experts in law, finance, and technology and will handle appeals against regulatory decisions, ensuring fair and transparent resolution processes.
Encouraging Innovation
The legislation also provides a framework for responsible innovation. Startups and developers can test blockchain-based products within a regulatory sandbox, a controlled environment supervised by PVARA. This allows for experimentation while maintaining oversight. Additionally, the authority may issue no-action letters, temporarily exempting experimental projects from certain rules under defined conditions.
By introducing these provisions, Pakistan is positioning itself as a forward-thinking nation in the evolving landscape of digital finance. The Virtual Assets Act not only addresses the risks associated with virtual assets but also creates opportunities for growth and innovation in the sector.
