Pakistan has formally opened its virtual-asset licensing regime as the country attempts to bring cryptocurrency businesses into a regulated financial system.
The Pakistan Virtual Assets Regulatory Authority (PVARA) notified its licensing regulations on August 22 and opened its application portal, completing the framework established under the Virtual Assets Act, 2026. The regime covers 10 categories, including exchanges, custody, broker-dealer services, advisory, lending and borrowing, derivatives, asset management, transfers and settlement, token issuance and mining-related services.
The framework requires licensed providers to meet requirements covering governance, technology, cybersecurity, customer protection and anti-money laundering and counter-terror financing controls. Existing virtual-asset businesses must submit NOC applications by September 5, 2026, or cease operations.
The move gives Pakistan a formal regulatory structure for an industry that previously operated with limited legal clarity. But the country’s push to position itself as a digital-asset market comes against a much more difficult domestic backdrop.
Crypto regulation meets a limited digital economy
Pakistan’s crypto ambitions are unfolding in a country where access to the underlying digital infrastructure remains uneven.
World Bank data shows that about 57% of Pakistan’s population used the internet in 2025, compared with 74% globally. That leaves a substantial share of the population without regular internet access. DataReportal’s 2026 Pakistan report similarly estimated 117 million internet users at the end of 2025, meaning roughly 139 million people remained offline. It also cautioned that mobile connections should not automatically be treated as internet access.
The contrast is important for a country seeking to build a formal virtual-asset economy. Licensing can establish rules for exchanges and custodians, but it does not by itself solve affordability, connectivity, digital literacy or access to reliable financial infrastructure.
Pakistan also continues to face significant economic pressures. The World Bank estimated that the national poverty rate rose to 25.3% in 2023/24 after years of shocks including inflation, floods and macroeconomic instability, although it later projected a decline to 22.2% in FY25 as economic conditions improved.
That makes the government’s crypto strategy a policy balancing act: it wants to attract investment and formalize digital assets while much of the population still faces barriers to basic digital and economic participation.
The security question is harder
The most consequential question for Pakistan’s crypto framework may be whether its AML and CFT controls can prevent virtual assets from becoming another channel for terrorist financing.
PVARA’s own framework identifies terrorist financing as a regulatory concern. The Virtual Assets Act gives PVARA powers to coordinate with the Financial Monitoring Unit, AML/CFT authorities and law-enforcement agencies to combat money laundering, terrorist financing and other illicit activity involving virtual assets.
For India, this concern is particularly significant because of Pakistan’s longstanding terrorism record. India’s Ministry of External Affairs has repeatedly described the existence of a Pakistan-based, state-supported terrorist ecosystem directed against India and has pointed to the continued presence of UN-designated terrorists and terrorist entities in Pakistan.
The Financial Action Task Force has also documented terrorist-financing cases involving Pakistan-originating funds. One FATF case study described an investigation in India alleging that Hizbul Mujahideen received funds originating from Pakistan through multiple channels to support terrorist activities in India. The group is designated as a terrorist organisation by India, the United States and the European Union.
This history gives Pakistan’s crypto licensing regime a security dimension that goes beyond ordinary market regulation.
PRAHAAR puts crypto into India’s counter-terror framework
India’s concern is no longer theoretical. The Ministry of Home Affairs’ PRAHAAR counter-terrorism strategy, released in February 2026, specifically warned that terrorist networks are increasingly using crypto wallets and other digital tools to move funds and evade traditional financial controls.
The concern has subsequently appeared in Indian investigations. The Crypto Times reported that a Gujarat investigation into a ₹226-crore crypto network allegedly linked to terror financing involved USDT transactions and international channels. By August, Indian authorities had arrested 14 people in the case, with investigators estimating that 30% to 40% of the traced transaction volume involved what officials described as illicit crypto connected to terror financing, cyber fraud, and organized crime. Another Indian investigation into an alleged ISIS-linked digital module examined cryptocurrency dealings involving contacts in Pakistan, Afghanistan, and Turkey.
These cases illustrate why cross-border digital-asset flows require strong KYC, transaction monitoring, sanctions screening, and information-sharing mechanisms.
Regulation is only the beginning
On paper, PVARA requires applicants to establish AML/CFT programmes, conduct KYC and transaction monitoring, report suspicious activity and implement cybersecurity controls. The framework also provides for sanctions screening and coordination with financial-intelligence and law-enforcement bodies. But the challenge is implementation.
A formal licence does not automatically make an ecosystem compliant. Pakistan will need to demonstrate that licensed entities can identify suspicious transactions, trace cross-border flows, and prevent sanctioned or terrorist-linked actors from exploiting digital assets. That will be particularly important given Pakistan’s existing terrorism backdrop and India’s documented concerns over Pakistan-based militant networks.
For Pakistan, the licensing regime represents a significant shift from regulatory uncertainty toward formal supervision. But its success will depend on whether the country can build credible enforcement alongside the rules.
For India and other neighbouring jurisdictions, the test will be whether Pakistan’s new crypto framework can prevent digital assets from becoming another cross-border channel for money laundering or terrorist financing while still supporting legitimate financial innovation.
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