The State Bank of Pakistan has officially updated its regulatory framework to allow financial institutions to engage with Virtual Asset Service Providers licensed by the Pakistan Virtual Asset Regulatory Authority. This landmark shift effectively replaces the restrictive 2018 policy that previously prohibited regulated entities from dealing in virtual currencies and tokens. This policy evolution is closely aligned with the Virtual Assets Act 2026 and reflects the government’s movement toward a supervised and transparent digital asset ecosystem. Under this new regime, PVARA serves as the primary statutory body responsible for the licensing, supervision, and oversight of all virtual asset activities within the country.
According to the new SBP guidelines, banks under its jurisdiction are now authorized to open accounts for entities that hold a valid VASP license issued by PVARA. Before initiating any banking services or onboarding these firms, banks must independently verify the authenticity of the PVARA license and maintain a permanent record of this verification. This procedural safeguard ensures that only legitimate, regulated entities can enter the formal financial system. Furthermore, for the operational handling of client-related transactions, banks are permitted to establish separate transactional accounts known as Client Money Accounts. These accounts are specifically designed to protect user funds by ensuring they remain entirely separate from the VASP’s own operational capital.
The central bank has mandated that Client Money Accounts must be maintained in Pakistani rupees and operate on a non-remunerative basis, meaning they cannot earn interest. To maintain a clear digital paper trail, the SBP has strictly prohibited cash deposits and withdrawals from these accounts. Additionally, funds held in these accounts cannot be utilized as collateral or security for any credit facilities or financing arrangements. These restrictions are intended to keep the volatile nature of virtual assets isolated from the broader stability of the traditional banking sector, while simultaneously providing a secure gateway for authorized digital transactions.
Financial institutions are now required to implement enhanced customer due diligence when engaging with VASPs. This includes a comprehensive assessment of the service provider’s business model, customer onboarding procedures, and geographic exposure. Banks must also update their risk profiling frameworks to specifically address virtual asset-related risks, applying appropriate risk ratings backed by reinforced monitoring systems. Ongoing monitoring is mandatory to detect potential irregularities, and banks are obligated to report any suspicious activity to the Financial Monitoring Unit in accordance with the Anti-Money Laundering Act 2010. These measures are critical for maintaining the integrity of the financial system and preventing the misuse of digital assets.
For entities that are still in the process of obtaining a formal license, the SBP allows for limited-purpose banking facilities if they hold a No Objection Certificate from PVARA. However, full transactional capabilities and virtual asset-related services will only be unlocked once formal licensing is finalized. It is important to note that while banks can provide services to VASPs, they remain strictly prohibited from investing in, trading, or holding virtual assets using their own proprietary funds or customer deposits. Banks continue to bear full responsibility for compliance with foreign exchange regulations and all other applicable laws, ensuring that the transition to a digital asset market is handled with the highest degree of regulatory caution.
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