The Virtual Assets Act, 2025 creates the Pakistan Virtual Asset Regulatory Authority (PVARA), a new autonomous regulator to supervise the virtual asset economy, ensure compliance with global anti-money laundering standards and support financial innovation through regulatory sandboxes.

Pakistan’s move aligns with similar frameworks adopted by global peers such as the United Arab Emirates, Singapore, India, and the European Union, where regulators have introduced crypto-specific licensing, centralized oversight authorities, and pilot programs for central bank digital currencies (CBDCs).

The State Bank of Pakistan has also separately announced it is preparing to launch a pilot for a digital rupee, marking a broader shift toward digital modernization of Pakistan’s financial system.

“The Authority has been granted comprehensive powers to ensure transparency, compliance, financial integrity, and the prevention of illicit activities, in alignment with international standards including those of the Financial Action Task Force (FATF),” the finance ministry said, describing the powers of the new regulator set up under the Virtual Assets Act.

Separately, speaking at the Reuters NEXT Asia summit in Singapore on Wednesday, Governor State Bank Jameel Ahmad said the new law would “lay down the foundations for the licensing and regulation” of the virtual assets sector and that the central bank was already in touch with some tech partners.

He said a legal framework for virtual assets was necessary to “evaluate and manage the risk very carefully, and at the same time not allow to let go the opportunity.”

In May, the State Bank clarified that virtual assets were not illegal but advised financial institutions not to engage with them until a formal licensing framework was in place.

The new regulator will introduce a structured licensing regime for all firms offering services related to cryptocurrencies, digital tokens and blockchain-based assets in or from Pakistan. These entities must meet operational and compliance standards and will be subject to ongoing reporting obligations.

The law gives PVARA powers to combat illicit finance and enforce transparency in line with the FATF framework, a key benchmark for Pakistan, which was removed from the FATF grey list in 2022 after significant reforms.

The regulator’s governing board will include top officials from Pakistan’s economic and regulatory institutions: the governor of the State Bank of Pakistan, secretaries of finance, law, IT and telecom, as well as the chairpersons of the Securities and Exchange Commission of Pakistan, the Federal Board of Revenue and the Digital Pakistan Authority.

Two independent directors with expertise in law, technology, or finance will also be appointed by the federal government.

The chairperson of the Authority, who will lead PVARA’s operations, is to be selected based on “demonstrated experience in finance, law, technology, or regulatory affairs,” according to the statement.

In a nod to Pakistan’s Islamic financial system, the law mandates the creation of a Shariah Advisory Committee to advise PVARA on the religious permissibility of virtual asset products and services. Any licensed firm offering Shariah-compliant services must adhere to this committee’s rulings.

To handle disputes, the law also establishes a Virtual Assets Appellate Tribunal, which will operate independently and include experts in law, finance, and technology to hear appeals against regulatory decisions.

The legislation provides space for responsible innovation by allowing startups and developers to test blockchain-based products within a regulatory sandbox, a controlled environment supervised by PVARA.

The authority may also issue no-action letters, temporarily exempting experimental projects from certain rules under defined conditions.