Pakistan Formally Legislates Cryptocurrency Regulation, Imposing Criminal Penalties and Sharia Compliance

The Parliament of Pakistan recently passed the Virtual Assets Act, 2026, converting the previously temporary presidential decree into permanent law, marking a new stage in the country's regulation of cryptocurrencies. The Act aims to regulate previously widespread but unregulated crypto usage and impose criminal penalties on unlicensed operators.

Previously, Pakistan had completely banned cryptocurrency trading in 2018, but it is estimated that there are currently about 40 million active users in the country, making it one of the largest crypto markets among developing countries. To address this reality, the government established the Pakistan Virtual Asset Regulatory Authority (PVARA) through a presidential decree in July 2025, which was originally scheduled to expire in March 2026. The passage of the new Act gives the agency statutory status and allows it to continue operating.

According to the new regulations, institutions applying for a full operating license must meet several conditions: First, they must have already obtained regulatory approval in major jurisdictions such as the United States, Europe, or Singapore; second, they must meet the statutory capital requirements; and more importantly, all business must be reviewed by a committee of Islamic finance scholars to ensure compliance with Sharia law principles. Currently, no entity has been approved to conduct commercial services. This legislative move reflects the Pakistani government's strategic shift from "prohibition" to "control" of the crypto economy. For many years, due to the lack of a regulatory framework, the government has found it difficult to track transactions, collect taxes, or prevent money laundering. The new Act is designed with reference to the international standards of the Financial Action Task Force (FATF), which will help Pakistan ease international financial compliance pressures and enhance its credibility in the global financial system.