Key Takeaways
- • Pakistan's State Bank lifted an eight-year ban on crypto banking effective April 14, 2026, permitting regulated banks, microfinance banks, and payment system operators to open accounts for licensed virtual asset service providers (VASPs) under the newly enacted Virtual Assets Act.
- • Customer funds must be held in segregated, non-interest-bearing Pakistani rupee accounts; banks are strictly prohibited from investing, trading, holding, or using customer deposits for cryptocurrency transactions.
- • Banks must independently verify VASP licenses issued by Pakistan's Virtual Asset Regulatory Authority (PVARA) and conduct enhanced due diligence under anti-money laundering, know-your-customer, and counter-terrorism financing regulations before onboarding crypto firms.
- • The regulatory framework replaces the April 2018 circular that banned all virtual currency processing and trading, signaling a shift toward formal oversight and transparency in Pakistan's crypto sector rather than prohibition.
- • SBP Director Syed Mansoor Ali stated that banks must revise customer risk profiling models, apply ongoing transaction monitoring, and report suspicious activity to the Financial Monitoring Unit.
Summary
Pakistan's State Bank has formally ended an eight-year restriction on cryptocurrency banking, issued through a directive dated April 14, 2026, that permits regulated financial institutions to serve licensed digital asset operators. The move represents a fundamental policy reversal from the April 2018 circular that prohibited all virtual currency processing, trading, and holding. The new framework aligns with Pakistan's recent enactment of the 2026 Virtual Assets Act, which established the Pakistan Virtual Asset Regulatory Authority (PVARA) as the sector's licensing and supervisory body.
Under the updated regulations, banks, microfinance banks, and payment system operators may open accounts for entities holding valid PVARA licenses or possessing a No Objection Certificate during the licensing application process. However, the framework imposes substantial structural safeguards: customer funds must be deposited in segregated Client Money Accounts denominated in Pakistani rupees, designated as non-remunerative (non-interest-bearing), and subject to prohibitions on cash deposits and withdrawals. Banks are explicitly barred from using these accounts as collateral or security for financing arrangements.
The directive prohibits banks from commingling client funds with VASP operational balances and expressly forbids financial institutions from investing, trading, or holding virtual assets using either their own capital or customer deposits. This dual restriction reflects regulatory intent to isolate banking infrastructure from crypto asset exposure while enabling settlement services. Regulated entities must obtain independent verification of VASP licenses prior to account opening and implement enhanced customer due diligence protocols compliant with Anti-Money Laundering, Combating the Financing of Terrorism, and Countering Proliferation Financing standards.
SBP Director Syed Mansoor Ali emphasized that banks must revise customer risk profiling models to account for VASP exposure and maintain ongoing transaction monitoring with mandatory suspicious activity reporting to the Financial Monitoring Unit. The framework signals Pakistan's transition from categorical prohibition to conditional authorization under strict compliance parameters, positioning the sector for regulated growth while maintaining banking system integrity and counter-threat finance protections.
Under the updated regulations, banks, microfinance banks, and payment system operators may open accounts for entities holding valid PVARA licenses or possessing a No Objection Certificate during the licensing application process. However, the framework imposes substantial structural safeguards: customer funds must be deposited in segregated Client Money Accounts denominated in Pakistani rupees, designated as non-remunerative (non-interest-bearing), and subject to prohibitions on cash deposits and withdrawals. Banks are explicitly barred from using these accounts as collateral or security for financing arrangements.
The directive prohibits banks from commingling client funds with VASP operational balances and expressly forbids financial institutions from investing, trading, or holding virtual assets using either their own capital or customer deposits. This dual restriction reflects regulatory intent to isolate banking infrastructure from crypto asset exposure while enabling settlement services. Regulated entities must obtain independent verification of VASP licenses prior to account opening and implement enhanced customer due diligence protocols compliant with Anti-Money Laundering, Combating the Financing of Terrorism, and Countering Proliferation Financing standards.
SBP Director Syed Mansoor Ali emphasized that banks must revise customer risk profiling models to account for VASP exposure and maintain ongoing transaction monitoring with mandatory suspicious activity reporting to the Financial Monitoring Unit. The framework signals Pakistan's transition from categorical prohibition to conditional authorization under strict compliance parameters, positioning the sector for regulated growth while maintaining banking system integrity and counter-threat finance protections.
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