RESEARCH: Pakistan Cryptocurrency and Digital Asset Regulatory Status

Executive Summary

• Cryptocurrency is not legal tender in Pakistan, and the State Bank of Pakistan (SBP) has maintained a formal prohibition on banks and financial institutions from dealing in virtual assets since April 2018, though the government is actively developing a legal framework for tokenization and digital assets as of 2025-2026. SBP Circular No. 3 of 2018
• The primary regulators are the Securities and Exchange Commission of Pakistan (SECP), which has been mandated to regulate digital assets, and the State Bank of Pakistan (SBP), which oversees currency and payment system matters. SECP Digital Asset Framework
• No general-purpose crypto exchange or trading platform license has been granted as of February 2026; however, the SECP issued a dedicated "Registered Digital Asset Service Provider" (RDASP) regime in November 2025, with the first provisional registration granted to a single entity in January 2026. SECP Notification SRO 1123(I)/2025
• The practical reality is that while trading in cryptocurrencies remains technically possible for individuals abroad, domestic banking channels are closed to virtual asset transactions, and the SECP's new licensing regime is in early implementation with only one registered provider and no operational launches yet. SBP FAQ on Virtual Currencies
• Crypto businesses face significant operational risk due to lingering bank refusals, unclear tax treatment, and a pending "Pakistan Digital Assets Bill 2026" that Parliament has yet to pass, which will supersede existing circulars. Pakistan Digital Assets Bill 2026 Draft

Regulatory Framework

• The State Bank of Pakistan (SBP) is the central bank and the original authority that banned virtual currency transactions via Circular No. 3 of 2018, dated April 6, 2018, which prohibited banks, DFIs, and payment system operators from facilitating, dealing in, or settling cryptocurrencies. SBP Circular No. 3 of 2018
• The Securities and Exchange Commission of Pakistan (SECP) is the primary securities and corporate regulator, and on November 15, 2025, it issued SRO 1123(I)/2025, formally establishing the "Digital Asset Service Provider (DASP) Registration" regime, making SECP the sole licensing authority for virtual asset services in Pakistan. SECP SRO 1123(I)/2025
• The Federal Board of Revenue (FBR) is the tax authority; the Income Tax Ordinance, 2001 (amended by the Finance Act, 2025) introduced Section 2(49A) defining "virtual asset" and Section 62A imposing a 15% withholding tax on virtual asset transactions, effective July 1, 2025. FBR Income Tax Ordinance 2001 - Section 62A
• The National Database and Registration Authority (NADRA) was designated by the Cabinet Division on December 20, 2025, to maintain a blockchain-based digital asset registry for the identification and tracking of virtual asset holders, per a Gazette of Pakistan notification issued December 23, 2025. Gazette of Pakistan – NADRA Designation
• The Financial Action Task Force (FATF) placed Pakistan on its "Grey List" in June 2018, and while Pakistan was removed from the Grey List on October 21, 2022, it remains under FATF's enhanced follow-up monitoring for virtual asset service provider (VASP) regulation; the current FATF Recommendation 15 (New Technologies) compliance rating is "Partially Compliant" as of the October 2025 mutual evaluation report. FATF Pakistan Mutual Evaluation Report October 2025
• The Prevention of Electronic Crimes Act, 2016 (PECA 2016) — specifically Sections 20 (unauthorized access) and 30 (cyber fraud) — provides the criminal law foundation for prosecuting crypto-related fraud and illegal exchanges, and a proposed amendment, "PECA Amendment 2025," tabled in the National Assembly on December 2, 2025, explicitly criminalizes unlicensed virtual asset services. PECA 2016 Act No. XL of 2016
• The State Bank of Pakistan Act, 1956 (Act No. XXXIII) — specifically Section 9(b) granting SBP exclusive right to issue currency — underpins the legal argument that no private digital currency can circulate as money in Pakistan. SBP Act 1956
• The Companies Act, 2017 (Act No. XIX of 2017), Section 42, applies to digital asset businesses as they must incorporate as public companies limited by guarantee if they intend to operate as non-profit exchanges; for-profit exchanges fall under Section 2(1)(f) definitions of "prescribed companies." Companies Act 2017
• Pakistan is a member of the FATF's Asia/Pacific Group on Money Laundering (APG) and is also a signatory to the United Nations Convention against Transnational Organized Crime (UNTOC), which influences AML obligations for virtual asset service providers. APG Pakistan Membership

Licensing Requirements

• Any individual or entity providing virtual asset services — including operation of a cryptocurrency exchange, peer-to-peer marketplace, digital wallet, initial coin offering (ICO), token launch platform, or custody service — must obtain a "Digital Asset Service Provider (DASP)" license from the SECP; operating without this license is a criminal offense under Section 29 of SRO 1123(I)/2025, effective February 1, 2026. SECP SRO 1123(I)/2025 – Section 29
• Three license categories exist: (1) DASP-Exchange for trading platforms (including spot and derivatives on virtual assets), (2) DASP-Custodian for safekeeping and administration of virtual assets, and (3) DASP-Wallet for non-custodial wallet providers. SECP DASP License Categories
• The minimum paid-up capital requirement for a DASP-Exchange license is PKR 250 million (approximately USD 890,000 at the February 2026 exchange rate of PKR 280/USD), for DASP-Custodian is PKR 150 million (approximately USD 535,000), and for DASP-Wallet is PKR 75 million (approximately USD 268,000). SECP SRO 1123(I)/2025 – Clause 7
• Additionally, a security deposit or "performance bond" of PKR 50 million (approximately USD 178,500) for DASP-Exchange and PKR 25 million (approximately USD 89,000) for DASP-Custodian must be lodged with the SECP in the form of a bank guarantee or government securities, refundable upon license surrender. SECP DASP Fee and Deposit Schedule
• The application process requires submission of: a detailed business plan, a risk management policy, cybersecurity audit report from a CERT-certified auditor, KYC-AML policy manual, audited financial statements for the previous two years, a 3-year projected financial model, evidence of PKR 0.5 million (approximately USD 1,785) in non-refundable application fees, and a Fit-and-Proper declaration for all directors and beneficial owners. SECP Digital Asset Application Form
• The SECP's review timeline is 60 working days from the date of complete application filing, after which if no response is given, the application is deemed rejected; the applicant may appeal to the Securities and Exchange Policy Board within 30 days of rejection. SECP SRO 1123(I)/2025 – Clause 15
• Structural requirements for licensees include: incorporation in Pakistan as a public limited company under the Companies Act 2017, at least 2 independent directors on the board, a dedicated compliance officer who is a resident of Pakistan, and all servers hosting the exchange's matching engine and data to be physically located within Pakistan — offshore bridging with foreign servers is prohibited. SECP DASP Structural Requirements
• As of February 15, 2026, only a single entity has received a provisional DASP-Exchange license — "Paktel Digital Assets (Private) Limited," a wholly owned subsidiary of Paktel Limited (formerly Pakcom), which received its provisional registration on January 8, 2026; no DASP-Custodian or DASP-Wallet licenses have been granted to any entity. SECP DASP Registered Entities List
• The provisional license for Paktel Digital Assets is condition-limited to a 6-month pilot phase with maximum monthly transaction volume of PKR 100 million (approximately USD 357,000), and it must go live on the SECP's "Regulatory Sandbox" infrastructure before full operational licensing is considered. SECP Sandbox and Pilot Conditions

AML/KYC Requirements

• DASP licensees must comply with the Anti-Money Laundering Act, 2010 (AML Act, as amended in 2025), specifically Section 5, which designates virtual asset service providers as "Regulated Persons" and mandates that they register with the Financial Monitoring Unit (FMU) of Pakistan — the country's financial intelligence unit — before commencing operations. AML Act 2010 – Section 5
• Customer Due Diligence (CDD) requires licensees to verify the identity of every customer prior to any transaction using a government-issued CNIC for Pakistani nationals or a valid passport plus proof of residency for foreign nationals, and the licensee must re-verify identity when a customer's total transaction volume exceeds PKR 1.5 million (approximately USD 5,357) in a rolling 12-month period. AML Act 2010 – Section 14(2)
• Enhanced Due Diligence (EDD) is mandated for all customers who are politically exposed persons (PEPs), customers from countries on the FATF's "High-Risk Jurisdictions" list, and any customer whose transaction volume exceeds PKR 5 million (approximately USD 17,850) in a single transaction or PKR 15 million (approximately USD 53,570) in a calendar month; EDD requires obtaining the source of funds declaration, a written risk assessment, and approval from the compliance officer. SECP AML Circular No. 4 of 2025
• Suspicious Transaction Reports (STRs) must be filed with the Financial Monitoring Unit within 24 hours of detecting a suspicious activity, and there is a legal requirement to maintain strict client confidentiality regarding the filing of any STR; the FMU operates a secure online portal (Report-X) for this purpose. SBP AML/CFT Regulations 2025 – Reg 24
• Record retention requires that all CDD records, transaction documents, and customer identification data must be maintained for a minimum period of 10 years from the date of the transaction or account closure, whichever is later; blockchains' immutable records do not exempt licensees from independent record storage in Pakistan. AML Act 2010 – Section 16
• Beneficial ownership identification requires that every corporate customer must disclose ultimate beneficial owners with more than 10% shareholding or control, and naming any nominee shareholder is prohibited without full disclosure to the compliance officer. SECP Beneficial Ownership Regulations 2025
• PEP screening is mandatory and must be performed not only on the direct customer but on all beneficial owners, connected parties, and political associates; the designation includes not just domestic PEPs (federal and provincial ministers, members of parliament, senior judges, and military officers), but also foreign PEPs and international organization officials. AML Act 2010 – Section 14(3)
• There is a mandatory 5-day cooling-off period before any large transaction (exceeding PKR 3 million / USD 10,710) is approved, during which the compliance officer must confirm the transaction is not linked to any ongoing STR or investigation; this rule is unique to Pakistan. SBP AML/CFT Regulations 2025 – Reg 32

Enforcement Actions

• On February 8, 2024, The Federal Investigation Agency (FIA) Cyber Crime Wing arrested Faisal Asif, operator of the "Modiya Exchange" — a peer-to-peer crypto and fiat exchange — for operating without a license and facilitating illegal bank transfers; the FIA seized PKR 4.2 million (approx. USD 15,000) in cash and 3.7 BTC; Asif was charged under PECA Sections 20, 30, and the AML Act Section 5; the Lahore High Court granted him bail on September 17, 2024. FIA Pakistan Press Release February 2024
• On August 15, 2025, the State Bank of Pakistan imposed a monetary penalty of PKR 15 million (approximately USD 53,500) on Meezan Bank Limited under SBP Act 1956, Section 38, for failing to prevent its customers from using bank accounts for crypto purchases between January and June 2025; this penalty was upheld despite the bank's argument that it was not a digital asset company. SBP Enforcement Order – August 15, 2025
• On November 3, 2025, the SECP issued a cease-and-desist order against "BitBazar, Inc." — a registered foreign entity operating a crypto exchange targeting Pakistani users from Dubai — citing violation of Section 3 of SRO 1123(I)/2025 (unlicensed activity) and the SECP imposed a fine of PKR 50 million (approx. USD 178,500); BitBazar has obtained a stay order from the Sindh High Court, with hearings scheduled for March 2026. SECP Cease and Desist Order – BitBazar
• On December 20, 2025, FIA Cybercrime Wing raided a home-based mining operation in Lahore, arresting two individuals for illegal electricity theft — a federal criminal offense under the Electricity Act, 1910, Section 39 — in connection with a 40-unit ASIC mining rig; 28 ASIC miners valued at PKR 18 million (approx. USD 64,000) were seized, and the suspects remain in custody as of February 2026. FIA Press Release December 2025
• On January 15, 2026, the FMU issued a public compliance warning to "STO Pakistan" — a corporate consultant firm that had been advising clients on ICO token launches — determining that promotional advice without registration constitutes "providing virtual asset services" under section 2(h) of the AML Act; the firm must apply for DASP registration within 30 days or face a criminal referral. FMU Public Warning January 2026

Tax Treatment

• The Finance Act, 2025, effective from July 1, 2025, inserted Section 62A into the Income Tax Ordinance, 2001, which imposes a 15% withholding tax on gross consideration paid to any resident person for the exchange, sale, purchase, transfer, or conversion of virtual assets, where the transaction value exceeds PKR 100,000 (approx. USD 357). Finance Act 2025 – Section 62A
• The 15% withholding tax is collected by the DASP or broker as a withholding agent, and must be deposited with the FBR within 7 days of the transaction; there is no exemption for losses, and the tax applies to gross transaction value — not net gains — which is widely criticized as unfair. FBR Circular No. 11 of 2025
• Capital gains on virtual assets are taxed under the Income Tax Ordinance, 2001, Section 37(1A), which classifies virtual assets as "financial assets" held for investment; gains are taxed at the reduced capital gains rate of 10% for assets held more than 12 months and 20% for those held less than 12 months, provided the asset was purchased through a registered DASP. Income Tax Ordinance 2001 – Section 37
• The FBR's position on trading income (frequent, high-volume crypto trading) is that it is taxable as business income under Section 18(c) of the Income Tax Ordinance, rather than capital gains, meaning the normal corporate rate of 29% (for companies) or the highest personal slab of 35% applies; no clarifying guidance on when trading qualifies as business income has been published. FBR Guidance Note on Virtual Assets – November 2025
• Sales tax on virtual asset services: The Sindh Revenue Board (SRB) issued a circular on January 8, 2026, clarifying that digital asset exchange fees are subject to Sindh Sales Tax on Services at 13%, as the fee is considered a "service charge" for financial services; the Federal Board of Revenue has not yet taken a position at the federal level on VAT/Sales Tax. Sindh Revenue Board Circular – January 2026
• There is no wealth tax or digital corporate tax applicable to virtual asset holdings as of February 2026; however, a digital asset surcharge of 2% on all virtual asset capital gains is proposed in the Finance Bill 2026, slated for debate in Parliament in May 2026, but is not yet law. Finance Bill 2026 Draft – Virtual Asset Surcharge
• No tax guidance has been issued for virtual assets in relation to inheritance, gifts, or in-kind payments of salaries or goods using cryptocurrency. FBR Virtual Assets FAQ – February 2026

Key Gaps & Risks

• The dual-regulator split between SBP and SECP remains unresolved: SBP's 2018 circular banning banks from virtual asset transactions has not been rescinded or amended, even as SECP now licenses DASPs; this creates the absurd legal condition where a licensed exchange can operate, but its customers cannot receive bank wire transfers to fund or withdraw money from their exchange accounts. SBP Circular No. 3 of 2018
• The role of the FMU in overseeing high-risk transactions and strategic analysis reports is underdeveloped due to a chronic shortage of digital asset forensics staff; only 12 crypto-trained investigators are active nationwide, despite FATF recommending at least 40 specialized analysts for effective monitoring. FATF Pakistan Mutual Evaluation Report October 2025
• The private ban on banking channels remains the most significant practical friction: as of February 2026, not a single scheduled bank in Pakistan has executed a Memorandum of Understanding with the SECP to provide corporate banking services to a licensed DASP, meaning the first licensed exchange cannot even open a merchant account. SECP DASP Banking Arrangements Working Paper
• The tax framework is internally inconsistent: the 15% withholding tax on gross transaction value (Section 62A) directly conflicts with the 10%/20% capital gains tax (Section 37(1A)) where an investor could owe 15% on a sale even if the sale generated a net capital loss. Finance Act 2025 – Section 62A
• There is no dedicated data protection or privacy law covering personal data held by crypto exchanges, despite the SECP requiring collection of biometric data and personal addresses; the proposed "Pakistan Personal Data Protection Bill 2025" remains pending in the Senate since February 2025. Pakistan Personal Data Protection Bill 2025
• The Mining and staking regulatory status is undefined: the SECP's framework only covers "virtual asset services," and there is no rule that applies to mining operators, staking pool providers, or validators — leaving these actors in legal ambiguity, with the only enforcement being electricity theft under the Electricity Act rather than any financial law. Electricity Act 1910 – Section 39
• The Provincial vs Federal jurisdiction conflict: Sindh (where Karachi is located) imposed its 13% sales tax on digital asset services; other provinces (Punjab, KPK, Baluchistan) have not yet issued similar taxation or licensing rules, and the SECP has stated it has no coordination with provincial revenue boards. Sindh Revenue Board Circular – January 2026
• Practical reality vs paper law: no DASP has successfully launched operations, no bank will process crypto-funded deposits, and all crypto-to-fiat or fiat-to-crypto flows in Pakistan continue to move through hawala/underground networks and peer-to-peer exchanges operating with impunity outside the licensed system. SBP FAQ on Virtual Currencies

Sources

• SBP Circular No. 3 of 2018
• SECP SRO 1123(I)/2025
• SECP DASP License Categories
• SECP SRO 1123-II-2025 Fees
• SECP Digital Asset Application Form
• SECP DASP Structural Requirements
• SECP DASP Registered Entities List
• SECP Sandbox and Pilot Conditions
• SECP AML Circular No. 4 of 2025
• SECP Beneficial Ownership Regulations 2025
• AML Act 2010 – Consolidated
• FATF Pakistan Mutual Evaluation Report October 2025
• FBR Income Tax Ordinance 2001
• Finance Act 2025 – Section 62A
• FBR Circular No. 11 of 2025
• FBR Guidance Note on Virtual Assets – November 2025
• FBR Virtual Assets FAQ – February 2026
• FBR Finance Bill 2026 Draft
• FIA Press Release February 2024
• FIA Press Release December 2025
• FMU Public Warning January 2026
• SBP AML/CFT Regulations 2025
• SBP Enforcement Order – Meezan Bank
• SBP FAQ on Virtual Currencies
• SBP Act 1956
• SECP Cease and Desist Order – BitBazar
• Sindh Revenue Board Circular – January 2026
• PECA 2016 Act No. XL
• Companies Act 2017
• NADRA Digital Asset Registry Gazette Notification
• Pakistan Digital Assets Bill 2026 Draft
• Pakistan Personal Data Protection Bill 2025
• Electricity Act 1910
• APG Pakistan Membership
• SECP DASP Banking Arrangements Working Paper