Pakistan Approves Virtual Assets Act 2025: Paving the Way for Regulated Digital Finance

Historic Step towards Digital Economy

The Government of Pakistan has taken a momentous stride in the digital finance sector by approving the “Virtual Assets Act, 2025.” This landmark legislation, officially sanctioned by the Federal Cabinet, Prime Minister Shehbaz Sharif, and President Asif Ali Zardari, seeks to regulate the rapidly evolving virtual asset industry in alignment with Shariah principles and international standards. The move demonstrates Pakistan’s intent to harness the potential of blockchain and digital assets while ensuring robust oversight and public confidence.

Establishment of the Pakistan Virtual Asset Regulatory Authority (PVARA)

At the core of the new law is the creation of the Pakistan Virtual Asset Regulatory Authority (PVARA), an autonomous federal body granted comprehensive powers to license, regulate, and supervise all entities engaged in the virtual asset sector. According to the Office of the Special Assistant to the Prime Minister/Minister of State on Blockchain and Crypto, PVARA’s mandate includes ensuring transparency, financial integrity, and strict compliance with international frameworks, such as those advocated by the Financial Action Task Force (FATF).

Inclusive Governance and Oversight Structure

PVARA’s governance will feature a Board comprised of high-ranking officials from key government institutions. This includes the Governor of the State Bank of Pakistan, Secretaries from the Ministries of Finance, Law and Justice, and Information Technology and Telecommunications, as well as chairpersons from the Securities and Exchange Commission of Pakistan (SECP), the Federal Board of Revenue (FBR), and the Digital Pakistan Authority. To enhance expertise and independent oversight, two independent directors with backgrounds in virtual assets, law, finance, or technology will also be part of the Board. An experienced Chairperson, chosen for their knowledge in finance, law, technology, or regulatory affairs, will preside over the Authority.

Comprehensive Licensing and Regulatory Framework

A central provision of the Virtual Assets Act, 2025, is the requirement for any individual or company wishing to offer virtual asset services in or from Pakistan to obtain a license from PVARA. The Act introduces a structured licensing regime, specifying standards for entity incorporation, operational capacity, compliance frameworks, and ongoing reporting obligations. This is designed to ensure that only credible and well-governed entities operate in Pakistan’s digital asset marketplace, reducing the risks of fraud and illicit activities.

Innovative Approaches: Regulatory Sandbox and No-Action Relief

Recognizing the fast-paced nature of technological innovation, the legislation incorporates forward-looking mechanisms to support responsible experimentation. The establishment of a regulatory sandbox allows emerging companies and technologies to test new digital asset services and business models under supervisory oversight, minimizing risks to consumers and the financial system. Additionally, the Authority is empowered to issue no-action relief letters under defined circumstances, giving innovators the opportunity to explore new ideas without immediate regulatory penalties while maintaining accountability.

Ensuring Shariah Compliance in Virtual Assets

A significant feature of the Act is its emphasis on Shariah compliance, which is vital in Pakistan’s predominantly Muslim society. The law mandates the formation of a Shariah Advisory Committee to guide the Authority on the Islamic permissibility of virtual asset products and services. Licensed entities offering Islamic financial products must strictly adhere to the Committee’s rulings, ensuring that the virtual asset sector remains compatible with Islamic financial principles and meets the ethical expectations of the public.

Judicial Recourse: Virtual Assets Appellate Tribunal

To guarantee fair and specialized adjudication of disputes, the Act establishes a Virtual Assets Appellate Tribunal. This tribunal, staffed by experts in law, finance, and technology, will hear appeals against regulatory decisions made by PVARA. Operating with judicial independence, the Tribunal ensures that stakeholders have access to justice and due process within the unique context of virtual assets.

Towards a Safe and Inclusive Digital Future

By enacting the Virtual Assets Act, 2025, Pakistan signals its commitment to building a secure, inclusive, and innovation-driven digital financial ecosystem. The comprehensive regulatory regime is designed to foster technological advancement, ensure public protection, and align the country’s virtual asset market with global best practices and Shariah requirements.