An interesting regulatory breakthrough just happened in Pakistan. Early last year, the Pakistan central bank officially allowed licensed virtual asset service providers (VASPs) to open bank accounts, ending an 8-year ban. This is not just a policy document change, but a turning point for Pakistan’s crypto ecosystem from being isolated from the financial system to being officially connected.

Speaking of which, Pakistan’s attitude towards crypto has been strict since 2018. At that time, the central bank basically banned all banking activities related to digital assets, mainly in response to FATF pressure, fearing money laundering and terrorist financing risks. But over the years, the situation has become more complex. On one hand, Pakistan has a large influx of remittances—according to the World Bank, over $24 billion in 2023—and much of this money still goes through traditional channels, which are inefficient and costly. On the other hand, there is a large unbanked population domestically, and crypto technology can actually solve real problems. So by 2025, the central bank finally changed its stance.

I think the core logic of the new framework is quite clever. Licensed VASPs can now open bank accounts, but only if they have official licenses issued by the government. These VASPs include exchanges, custody wallet services, digital asset brokers, and ICO platforms. But there is a key restriction: banks themselves cannot use customer deposits to invest in crypto, nor hold digital assets on their balance sheets. In other words, banks can only provide account services to these compliant crypto businesses, but cannot directly participate in the crypto market. This way, the door is opened, but risks are contained.

From the practical significance of crypto in Pakistan, this policy indeed solves a long-standing pain point. Compliant exchanges and wallet services can now operate normally, and users can trade in a more regulated environment. For the remittance market, this is an opportunity—crypto channels can offer faster, cheaper cross-border transfers than traditional methods. Moreover, in the long run, this provides clearer policy guidance for local developers and fintech entrepreneurs, potentially attracting international crypto exchanges to consider entering the Pakistani market.

Of course, the implementation process won’t be so simple. Banks need to learn how to verify genuine licenses, establish new risk models to assess VASP clients. VASPs also need to go through complex licensing procedures and continuously report to the central bank. Anti-money laundering, transaction monitoring, capital requirements, customer risk disclosures—these are all mandatory under the new framework. But this transparency approach is good in the long run, as it can formalize a previously quite opaque market.

Interestingly, Pakistan’s stance is somewhat centrist within the region. India remains restrictive on crypto bank accounts, Bangladesh has basically banned them, but the UAE allows more lenient policies within specific free trade zones. Pakistan has chosen a route that is neither fully open nor completely banned, responding to FATF recommendations while recognizing the economic value of crypto technology.

This entire evolution also reflects cautious policymaking. In 2021, a government research committee recommended replacing the ban with a regulatory framework; in 2023, legislation officially defined virtual assets and service providers; and only by 2025 did the bank access rules truly materialize. This phased approach, though slow, reduces the cost of trial and error.

The next few months will be critical. If this framework operates smoothly, Pakistan’s cryptocurrency regulation model could serve as a reference for other developing countries. Especially for those wanting to embrace financial innovation while preventing systemic risks, this case is very instructive. I personally see this as a development worth watching, especially if it can truly improve remittance efficiency and attract fintech investment.