The State Bank of Pakistan (SBP) and the Ministry of Finance advised the National Assembly (NA) Standing Committee on Finance that cryptocurrencies remain illegal in Pakistan, maintaining a firm stance that has generated discussion among the fintech and investment communities. This declaration supports the long-standing regulatory mistrust of digital currencies, such as Bitcoin, Ethereum, and Binance Coin, within the nation. Pakistan’s choice presents unique challenges and implications for its digital economy, monetary policy, and financial inclusion objectives, as global crypto adoption accelerates.
Apart from indicating a regulatory freeze on virtual currencies, the declaration places Pakistan in sharp contrast to regional neighbours, such as the United Arab Emirates and India, both of which are either creating or implementing crypto rules. This comprehensive paper examines the specifics of the statement, its historical context, implications for investors, and the broader implications for Pakistan’s digital transformation goals.
Pakistan’s Regulatory Stance on Cryptocurrencies
Historically, Pakistan’s central bank has seen cryptocurrencies with a wary and conservative perspective. The SBP issued a circular in April 2018, banning financial institutions from handling virtual currencies. Although not specifically criminalising crypto ownership or trading, the circular essentially discouraged controlled companies, such as banks and payment processors, from facilitating any activity related to digital assets.
When the Sindh High Court ordered the federal government to communicate with stakeholders and create a comprehensive crypto policy in 2021, this legislative approach was once again reflected. The SBP maintained its stance, cautioning against the speculative and unregulated nature of cryptocurrencies, even as global momentum in favour of blockchain technology and decentralised finance (DeFi) grows. This stance is now formally confirmed in the recent briefing to the NA committee, which verifies that transactions involving cryptocurrencies remain outside Pakistan’s legitimate financial system.
Key Reasons Why Cryptocurrency Is Not Legal in Pakistan
Several issues raised by the Ministry of Finance and the SBP helped to support their resistance to the legalisation of cryptocurrencies. The primary concern is the lack of regulatory control, which renders digital assets vulnerable to illicit financial flows, terrorist financing, and money laundering. To remain compliant with worldwide AML (Anti-Money Laundering) standards, the Financial Action Task Force (FATF) has also urged nations, including Pakistan, to tighten restrictions on digital transactions.
The volatility and speculative character of cryptocurrencies still raises a critical issue. For example, the price of Bitcoin fluctuated, swinging over $60,000 to under $20,000 in a short period, thereby exposing investors to significant risk. The SBP contends that allowing such unbridled assets into the mainstream financial system might compromise the nation’s monetary basis and thereby reduce the effectiveness of its tools for controlling inflation.
Macroeconomically, the Ministry of Finance emphasised that cryptocurrencies could challenge sovereign control of monetary policy, particularly if stablecoins or digital assets begin to displace fiat money in most transactions or transfers.
Affect on Tech Startups and Pakistani Investors
Many Pakistani crypto investors and blockchain firms find themselves in a grey area as a result of the crackdown on the legality of bitcoin. With millions of individuals reportedly engaging in crypto trading despite government warnings, platforms such as Binance, KuCoin, and OKX have gained significant popularity in Pakistan.
Data from Chainalysis shows Pakistan ranks among the top 10 countries in the 2021 Global Crypto Adoption Index, a reflection of great grassroots acceptance despite official resistance. This mismatch between public opinion and policy results in a fractured ecosystem where innovation is stifled and investor protection remains uncertain.
Faced with legal action, several blockchain-based startups—including those in DeFi, NFTs, and Web3 technologies—have either relocated their operations overseas or operated in secret. This prevents Pakistan from capitalising on the multitrillion-dollar global digital economy.
Legal vs. Illegal: Clarifying Digital Asset Situation in Pakistan
Although the SBP has unequivocally declared that cryptocurrencies are illegal, it is noteworthy that no regulation overtly criminalises the ownership of cryptocurrencies. This is a significant difference. While owning or trading cryptocurrencies on foreign platforms is not explicitly prohibited for anyone, if something goes wrong, there is no protection or remedy.
Moreover, Pakistan lacks a suitable legislative framework, resulting in the absence of KYC/AML requirements, taxation policies, and custody laws for digital assets, as well as licensed crypto exchanges. This legal void leaves users and law enforcement authorities in doubt, therefore strengthening the SBP’s stance against allowing the space until a thorough risk analysis is finished.
Global Divergence in Cryptocurrency Regulation
Globally, control of cryptocurrencies differs significantly, with China banning all crypto trading and mining, while El Salvador has adopted Bitcoin as a legal currency. By contrast, India is developing a regulatory framework under the Securities and Exchange Board of India (SEBI) and has imposed a 30% tax on cryptocurrency profits.
Launched the Virtual Assets Regulatory Authority (VARA) to control and support digital asset companies, the UAE, especially Dubai, runs the risk of tightening its policies, which could alienate international investment and innovation, at a time when regional rivals are fast embracing blockchain technologies.
Cryptocurrency Growth and Risks in Pakistan
In Pakistan, the enthusiasm for and education about cryptocurrency continue to rise, despite the official stance. Active Pakistani crypto communities on social media platforms, such as YouTube, Twitter, and Telegram, provide updates, debate trends, and advocate for education.
Sadly, this curiosity has also led to Ponzi schemes, rug pulls, and crypto scams, including the well-known FTX fraud, which targeted gullible consumers with promises of great returns. Such programs exploit the grey area and undermine confidence in digital finance due to a lack of regulatory clarity.
The argument of the SBP and the Ministry of Finance primarily revolves around the protection of the general public, emphasising the need for cryptoacy and organised control, even if the assets themselves are not legalised.
Crypto Bans to Regulate Innovation in Pakistan
Although the latest declaration seems to be the last nail in the coffin for legal cryptocurrencies in Pakistan, history shows that complete prohibitions hardly have long-term success. Early on, the Internet, ride-sharing, and e-commerce sectors all encountered similar opposition. However, they eventually found a path toward control and expansion.
Instead of imposing total restrictions, experts contend that Pakistan should focus on regulatory sandboxes, pilot projects, and cooperation with the fintech industry. This will enable innovation under regulated conditions, thereby aiding the country’s goals to digitise financial services and broaden its tax base. Furthermore, with worldwide momentum toward Central Bank Digital Currencies (CBDCs), including the SBP’s study on a digital rupee, the crypto debate in Pakistan might finally shift from a ban to regulation.
