State Bank of Pakistan Legalizes Cryptocurrency; A Digital Rupee Revolt

INTRODUCTION

The State Bank of Pakistan took a revolutionary step towards the digitalization of currency by allowing the use of cryptocurrency under an exclusive acquisition. This decision was made with the introduction of the Virtual Asset Bill 2025, which withdrew the advisory against virtual assets and introduced a Digital Rupee – its version of a Central Bank Digital Currency (CBDC).

In a digital policy shift, the State Bank of Pakistan (SBP) has officially moved to legalize cryptocurrency and initiate the launch of a Central Bank Digital Currency (CBDC) — the Digital Rupee. This bold step marks a turning point in Pakistan’s financial history, signaling a move from traditional monetary systems to a digitally regulated financial ecosystem. For years, cryptocurrencies existed in a legal grey area in Pakistan. Now, under the SBP’s new framework, virtual assets will gain recognition, regulation, and integration into the national economy.

In this new law, individuals will be able to buy and own legal virtual assets within defined limits to ensure compliance with the FATF guidelines and protect investors from excessive risks. The proposed Virtual Asset Bill 2025 aims to establish the Virtual Asset Regulatory Authority (VARA) under section 6, responsible for licensing, regulating, and monitoring the transactions and compliance.

Virtual Assets Bill 2025

Overview

According to the NEWS, the Bill aims to establish a formal legal and regulatory framework for virtual assets (cryptocurrencies, tokens, digital asset services) in Pakistan — replacing the previous advisory-only regime, which left many activities in a legal “grey area.” The News.

Key provisions

• The bill stated the establishment of the Pakistan Virtual Assets Regulatory Authority (PVARA) to license, regulate, and supervise virtual asset service providers (VASPs). Dawn+1
• The bill will take notice of the Licensing regime: Any exchange, custodian, wallet provider, or other VASP must obtain a licence, comply with KYC/AML (anti-money-laundering) and CTF (counter-terror financing) requirements. Dunya News+1
• The bill will ensure the creation of “Virtual Asset Zones” — designated areas for crypto/trading operations subject to strict oversight, to foster innovation with controlled risk. The News+1
• • It will introduce the stiff penalties for non-compliance: e.g., unlicensed operations may face up to 7 years in jail or huge fines, cancellation of the licence if fraud or false information. Dunya News
  • It will align the regime with global best practices (Financial Action Task Force, IMF standards) and promote financial innovation, inclusion & Shariah-compliance. Business Recorder+1

  The Bill also paves the way for a national digital currency (a digital rupee) and legalization of virtual assets under a regulated environment (though not as a general legal tender). NetMag Pakistan+1.

Implications

• Subjecting previously informal crypto and digital asset activity to formal regulation, oversight and transparency.
• Potentially enabling greater investor protection, reduction of illicit finance and better integration of crypto into the formal financial system.
• Introducing a shift in Pakistan’s monetary/financial architecture — enabling a central-bank digital currency, licensed digital-asset firms, and new fintech opportunities.
• For providers: compliance cost, licensing risk, and need for physical presence (for some). For regulators: building capacity, managing technology, cybersecurity, and supervision.
• For consumers/investors: clearer legal status, but also ongoing risk (the regime is new, implementation will matter).

Historical Background: From Crypto Bans to Digital Currency Leadership

For much of the past decade, Pakistan maintained a restrictive stance on cryptocurrencies. In 2018, the SBP instructed banks and payment processors not to deal with digital currencies due to lack of legal structure and concerns about money laundering. Despite this, Pakistan emerged as one of the top 10 countries globally in crypto adoption, with an estimated US$20–21 billion worth of digital assets held by Pakistanis. This widespread adoption — coupled with global trends towards central bank digital currencies (CBDCs) — pushed policymakers to rethink the old approach. Countries like China, India, Nigeria, and the UAE have already taken similar initiatives. Pakistan’s move now aligns it with this new wave of digital financial innovation.

What the SBP Has Announced

According to official briefings and reports in The Express Tribune, Dawn, and ProPakistani, the SBP’s plan has two main plans:

1. Legalisation of Virtual Assets

It will provide virtual assets such as Bitcoin, Ethereum, and stablecoins will be regulated under a new Virtual Assets Bill 2025.
A Pakistan Virtual Assets Regulatory Authority (PVARA) will oversee exchanges, wallets, and investors.
It will be provided to licensed platforms, and only licensed platforms will be allowed to operate, with strong KYC and AML compliance.
The Cryptocurrencies will not immediately become legal tender, but will be recognised as legitimate assets for trading and investment.

2. Introduction of the Digital Rupee

The Digital Rupee will be a blockchain-based digital currency issued directly by the State Bank.

It will maintain a 1:1 value with the Pakistani Rupee.
The Citizens will be able to hold and transact digital rupees through bank accounts and authorised wallets.

The State Bank of Pakistan plans to launch pilot testing by mid-2026, followed by nationwide rollout.

Critical Analysis by Experts

The financial experts say that while this is not a full-scale legalization of crypto trading, it is a significant step toward recognizing virtual assets in Pakistan. For investors, questions like “Is cryptocurrency legal in Pakistan?” now have clearer answers: Yes, but with restrictions.

Emphasizing the urgency of regulation, Senator Afanullah Khan noted that Pakistani investors have already invested approximately $21 billion in cryptocurrencies. To set the seal on transparency and accountability, it is mandated to include high-ranking officials on VARA’s board, such as:

• The SBP Governor
• Secretaries of Finance, Law, and IT
• Chairs of FBR, SECP, and Digital Pakistan
• Director-General of FIA

The board, furthermore, may include members of the Senate & National Assembly. It was recommended that the chairman possess at least 5 years of experience and not exceed the age limit of 55 years. The bill includes measures that align with FATF, anti-money laundering (AML), and counter-terror financing (CTF) standards.

Cryptocurrency Benefits for Pakistan’s Economy

It  will attract Foreign Investment in Pakistan
It will empower Youth & Freelancers, and they will familiarize themselves with different digital currencies.
It will enhance Digital Governance & Transparency in our finance sector.

It will help to boost tax Collection

It will make digital payments more easier for overseas Pakistanis.

Risks and Challenges Ahead

While the initiative is visionary, implementation requires caution. Key challenges include cybersecurity, volatility of crypto assets, public awareness, infrastructure limitations, and regulatory coordination.

The Way Forward

The roadmap includes 2025 for legal framework finalisation, 2026 pilot phase for the digital rupee, and 2027–2028 for full rollout and integration into the national payment system.

Limitations Of Crypto Currencies

Although crypto transactions will become legal, they will be restricted to a regulated ecosystem and cannot be used to purchase goods or services outside it. To alleviate risks, the bill mandates data privacy safeguards and holds service providers accountable for user data protection. It also prohibits insider trading by the board members and calls for transitioning to a revenue model driven by licensing fees and penalties. VARA will operate independently to ensure a secure and regulated environment for virtual assets, as noted by the Ministry of Law and Justice.

How to buy Bitcoin in Pakistan?

With rising interest in “How to buy Bitcoin in Pakistan” and the search for the “Best crypto exchange in Pakistan”, this decision could open the door for more structured investment opportunities. The Senate Finance Committee welcomed the first move but postponed further discussions until the next meeting to consummate the details of the Virtual Asset Bill 2025.

Conclusion:

The State Bank of Pakistan’s decision to legalise crypto and introduce the Digital Rupee marks a defining chapter in the nation’s financial evolution. It blends innovation with regulation, giving Pakistan the tools to modernise its economy, empower youth, and strengthen monetary control. If executed wisely, this could position Pakistan as a leader in digital finance across South Asia — bridging the gap between traditional banking and the blockchain-powered future.

FAQ

Q1: What is Pakistan’s Digital Rupee?
Ans: A central bank digital currency issued by the State Bank of Pakistan, pegged 1:1 with the rupee.

Q2: Is cryptocurrency now legal in Pakistan?
Ans: Yes, Cryptocurrency is now legal in Pakistan under the Virtual Assets Bill 2025.

Q3: When will the Digital Rupee launch?
Ans: The Digital Rupee is expected to be launched in a Pilot phase in mid-2026.

Q4: How will this affect remittances?
Ans: It will facilitate faster, cheaper, and more transparent remittances.

Q5: Can Pakistanis trade Bitcoin legally?
Ans: Yes, once licensed exchanges go live.