Pakistan’s Virtual Assets Act, 2026 cleared both chambers of parliament in early March. After presidential assent, one of the world’s largest crypto markets (40 million users, $25 billion in annual trading volume) will move from regulatory limbo to formal legislation.
But there is a problem: Pakistan has created a licensing regime for exchanges, custody, broker-dealers and derivatives. What it has not done is create a framework for stablecoins. And stablecoins are how Pakistan’s crypto economy actually functions. Over $30 billion in annual remittances flow through informal channels because traditional rails are slow and expensive. Dollar-backed stablecoins have become the default cross-border infrastructure.
The Act acknowledges this reality by including “issuance” and “transfer and settlement” as licensable categories. But no firm can obtain a licence for either until the State Bank of Pakistan (SBP) decides whether to allow stablecoin operations at all. That decision has not been made yet.
The reason is straightforward: the SBP is terrified of capital flight, and it has every reason to be. Pakistan operates under an IMF programme with strict conditions on foreign exchange reserves and capital controls. If stablecoins enable large-scale outflows and Pakistan misses an IMF installment, the consequences are not regulatory; they are macroeconomic. The currency collapses, inflation accelerates, and the entire framework becomes irrelevant.
So the SBP has taken the safest possible position: it has neither said no to stablecoins nor said yes. In 2018, it issued BPRD Circular No 03, barring banks from dealing with virtual currencies. In May 2025, it clarified through its External Communications Department that virtual assets were never illegal; in fact, banks were merely instructed to avoid them until a regulatory framework existed. However, the circular has not been withdrawn.
At the Pakistan Virtual Assets Regulatory Authority’s (PVARA) first board meeting, the central bank governor opposed lifting the restriction until a full licensing regime is operational. But ‘operational’ is undefined and stablecoin licensing is indefinitely deferred.
The result is regulatory theatre. The PVARA can licence exchanges for crypto-to-crypto trading, but fiat on-ramps and off-ramps remain constrained. It can approve custody services, but not stablecoin issuance. It can regulate derivatives, but not the transfer and settlement services that enable cross-border remittances. The framework exists, but it governs the periphery while the core – stablecoins – remains in limbo.
The opportunity exists, but the most valuable part of it remains off-limits. And caution has consequences. Pakistan’s $25 billion crypto market will not wait for the SBP to decide. It already runs on stablecoins through peer-to-peer networks and offshore platforms.
The Act does not formalise this activity; it regulates around it. Licensed firms can offer services, but the real economy continues informally. Tax revenue remains uncollected. Anti-money laundering monitoring remains limited. Consumer protection is absent. The Act’s stated goals are not achieved.
The next six months will clarify whether Pakistan’s framework can evolve beyond this constraint. Does the SBP withdraw or modify its 2018 circular? Does the PVARA issue licences for stablecoin issuance and cross-border transfers? Do licensed firms gain banking access for fiat settlement? If yes, Pakistan will have demonstrated that emerging markets can regulate crypto even under IMF constraints. If no, the Act becomes a monument to what regulation looks like when central banks are too wary to govern the market that actually exists.
Either way, Pakistan’s experiment reveals the limits of crypto regulation when macroeconomic survival is at stake – and the world is watching.
The writer is an Islamabad-based lawyer and Strategic Legal Counsel at HP | FKM. She can be reached at: [email protected]
