Pakistan Ends Crypto Banking Ban in Major Policy Shift

Pakistan has taken a major step towards formalizing its digital asset sector, as the State Bank of Pakistan moves to permit banks to open accounts for licensed crypto service providers.

The decision effectively reverses a 2018 restriction that had prevented financial institutions from engaging with virtual assets, signaling a broader shift toward regulation rather than prohibition.

From Ban to Controlled Integration

Under the updated framework, banks and regulated financial institutions are now allowed to work with virtual asset service providers (VASPs), provided those entities are licensed by the country’s new regulator, Pakistan Virtual Assets Regulatory Authority.

However, access comes with strict compliance requirements. Banks must conduct enhanced due diligence, continuously monitor transactions, and carefully assess the risk profiles of both service providers and their clients.

To improve transparency, institutions are also required to maintain segregated accounts, ensuring a clear separation between company funds and customer assets.

Tight Control on Banking Activity

The new rules impose several operational limits aimed at reducing financial risk. Accounts linked to crypto service providers must be denominated in Pakistani rupees, cannot generate interest, and are restricted from cash deposits and withdrawals.

Additionally, these accounts cannot be used as collateral for loans or credit facilities, reflecting regulators’ cautious approach to the volatility of digital assets.

Banks are also required to adhere to strict anti-money laundering and counter-terrorism financing standards, including deep scrutiny of business models, geographic exposure, and customer bases.

Limited Access for Unlicensed Firms

Entities that have not yet secured full authorization may still open restricted-purpose accounts to facilitate the licensing process. However, full banking services remain unavailable until regulatory approval is granted.

At the same time, banks are explicitly prohibited from trading, investing in, or holding digital assets using their own capital or customer deposits, reinforcing a clear boundary between traditional banking activities and crypto markets.

A New Legal Framework Takes Shape

The policy shift follows the introduction of Pakistan’s Virtual Assets Act 2026, which established PVARA as the central authority overseeing the sector.

The law aims to create a structured regulatory environment focused on investor protection, market integrity, and the responsible development of blockchain-based innovation. It also introduces licensing frameworks, supervisory mechanisms, and controlled testing environments for new financial technologies.

Demand Persisted Despite Restrictions

Despite the earlier ban, crypto adoption in Pakistan continued to grow through informal channels. Peer-to-peer trading expanded rapidly, with industry estimates suggesting usage increased severalfold in the years following the 2018 restrictions.

By early 2024, a large share of retail crypto activity was taking place outside formal financial systems, often through informal transfer networks.

Meanwhile, global platforms such as Binance gained significant traction in the country, reportedly attracting tens of millions of users.

Toward a Regulated Digital Asset Market

The central bank’s latest move reflects a broader global trend: governments are increasingly choosing to regulate digital assets rather than exclude them from the financial system.

By allowing controlled access through licensed intermediaries, Pakistan is attempting to strike a balance between oversight and innovation. The approach aims to bring crypto activity into the formal economy while maintaining safeguards against financial risk.