Pakistan Crypto Regulation Transformation: 2025 Pivot to Legalization

For years, owning Bitcoin or Ethereum in Pakistan was a legal gray zone - not officially illegal, but banks refused to touch it, exchanges shut down, and users operated in the shadows. That changed in 2025. On September 3, Pakistan flipped the script: cryptocurrency went from banned to legally recognized, but not how most people expected.

From Ban to Blueprint: The 2025 Shift

In 2018, the State Bank of Pakistan (SBP) told banks to cut off all crypto-related transactions. The message was clear: don’t touch it. But underground markets kept growing. By 2024, an estimated $21 billion in crypto was moving through Pakistan - remittances, peer-to-peer trades, and informal investments - all outside the system. The government couldn’t ignore it anymore.

The turning point came in September 2025. Dr. Inayat Hussain, Acting Deputy Governor of SBP, stood before the Senate and announced the bank would formally withdraw its 2018 ban. The reason? A new law: the Virtual Assets Bill 2025. Signed into ordinance by President Asif Ali Zardari on July 8, 2025, this bill didn’t just legalize crypto - it created a new regulator to control it.

Enter PVARA: the Pakistan Virtual Asset Regulatory Authority. This isn’t a advisory body. It’s a full-power regulator with the ability to license, audit, and shut down crypto businesses. It answers directly to the Finance Ministry and works alongside SECP, SBP, and the Ministry of IT. Its job? Make sure crypto doesn’t run wild.

What’s Actually Legal Now?

Here’s the catch: you can now legally hold Bitcoin, Ethereum, and other coins. You can send them to someone else. You can buy them with Pakistani rupees through licensed exchanges. That’s it.

You cannot use crypto to pay for groceries, phone bills, or ride-hailing apps. You cannot trade altcoins on open exchanges. You cannot invest in crypto funds or ETFs. The government isn’t banning crypto - it’s boxing it in.

The only real freedom? Holding and transferring. Everything else is blocked unless it’s approved by PVARA. That means no decentralized finance (DeFi), no NFT marketplaces, no crypto lending platforms - not yet, maybe never.

The Digital Pakistani Rupee: State Control, Not Crypto Freedom

While private crypto got limited legal status, the government launched its own digital currency: the Digital Pakistani Rupee (Digital PKR). This isn’t Bitcoin. It’s not even like Ethereum. It’s a Central Bank Digital Currency (CBDC) - fully controlled by the State Bank.

Think of it like mobile money, but on blockchain tech. You can send Digital PKR to anyone with a registered wallet. Transactions are instant. No fees. But here’s the key: the government sees every transaction. They can freeze accounts. They can track spending patterns. They can even set limits on how much you can transfer per day.

This isn’t about innovation. It’s about control. The SBP wants to replace cash and reduce reliance on foreign remittances - not empower individuals. The Digital PKR is designed to be the only digital money most Pakistanis ever use.

How Pakistan Compares to the Rest of the World

Pakistan’s approach doesn’t fit neatly into global categories.

- In El Salvador, Bitcoin is legal tender. You can buy coffee with it. In Pakistan? You can’t even buy a SIM card with Bitcoin.

- In the U.S., you can trade crypto on Coinbase, invest in crypto ETFs, and use crypto debit cards. In Pakistan? Only licensed exchanges are allowed - and they can’t offer trading beyond buying/selling.

- In India, crypto is taxed heavily but fully legal for trading. In Pakistan, trading is restricted to approved platforms with strict KYC.

- In the UAE, crypto hubs like Dubai offer licenses to global exchanges. Pakistan’s PVARA is focused on domestic compliance, not attracting international firms.

The closest model? China. Both countries ban private crypto use for payments and commerce, while building state-controlled digital currencies. But unlike China, Pakistan allows citizens to hold crypto - just not use it.

Who Benefits? Who Gets Left Behind?

The government says this move will bring the $21 billion crypto economy into the formal system. That means more tax revenue, better data on remittances, and fewer underground transactions. It also means foreign investors might finally feel safe putting money into Pakistan’s fintech sector.

But who’s really winning?

- Large remittance companies - They’re already partnering with PVARA to use crypto for cross-border transfers. This could cut fees and speed up payments from the Gulf and Europe.

- State-controlled fintech startups - If they get a license, they can build apps around Digital PKR and regulated crypto transfers.

- Traditional banks - They’re no longer afraid of crypto. Now they can offer custody services and compliance tools.

Who’s losing?

- Everyday crypto users - Many bought Bitcoin to protect savings from inflation. Now they can’t spend it. They can’t earn interest on it. They’re stuck holding it like a savings bond with no return.

- Developers and innovators - No DeFi, no NFTs, no Web3 projects. Pakistan could’ve become a regional tech hub. Instead, it’s building a walled garden.

- Small remittance users - If the only legal way to send crypto is through licensed providers, fees may stay high. The promise of cheaper transfers might not materialize.

Implementation Challenges Ahead

PVARA has a big job. They need to hire experts in blockchain, cybersecurity, and AML. They need to build a licensing system. They need to train bank staff. They need to connect Digital PKR to ATMs, mobile wallets, and point-of-sale systems.

And they’re doing it fast. As of October 2025, PVARA has issued its first 12 licenses to crypto exchanges and remittance platforms. But the system is still in pilot mode. There’s no public dashboard. No clear guide for users. No way to report problems.

Many users report confusion. “I can own Bitcoin now, but I can’t do anything with it,” said Ali Raza, a Lahore-based crypto holder. “It feels like they gave me a key to a room with nothing inside.”

What Comes Next?

The 2025 legalization isn’t the end. It’s the beginning of a controlled experiment.

PVARA plans to review the framework every six months. If remittance volumes increase and fraud stays low, they might allow limited crypto payments for utilities or online services. If the Digital PKR works smoothly, it could replace cash in cities by 2027.

But the core rule won’t change: the state controls the money. Crypto isn’t being embraced for its freedom. It’s being tamed for its utility.

For now, Pakistan’s crypto future looks less like a revolution and more like a carefully managed transition - one where the government keeps the keys, and the people just hold the lock.