Cryptocurrency has been discussed in Pakistan for years, but the legal position was not always easy for an ordinary person or business owner to understand. People were buying and selling digital assets, freelancers were receiving payments through digital platforms, businesses were exploring blockchain-based services, and investors were looking at assets such as Bitcoin and stablecoins.
At the same time, there were questions about regulation, banking, taxation, money laundering, consumer protection and the legal status of businesses dealing with virtual assets.
That position has now changed significantly.
Pakistan has introduced the Virtual Assets Act, 2026, which creates a dedicated legal framework for virtual assets and the businesses that provide virtual-asset services. The Act was promulgated on 4 March 2026 and extends throughout Pakistan. It also establishes the Pakistan Virtual Assets Regulatory Authority (PVARA) as the regulator responsible for licensing, regulating and supervising relevant virtual-asset activities.
This does not simply mean that “crypto is now legal” in a general sense. The new framework is more specific than that. It regulates virtual assets and, particularly, the businesses and persons providing services connected with them.
For investors, traders, companies, technology businesses, freelancers and financial institutions, understanding the difference is important.
This article explains the main legal developments in simple terms and discusses what the new framework may mean for people and businesses dealing with virtual assets in Pakistan.
What Are Virtual Assets?
Before discussing the law, it is important to understand what a virtual asset actually means.
In simple terms, a virtual asset is a digital representation of value or rights that can generally be transferred, traded or stored electronically.
Cryptocurrencies such as Bitcoin and Ether are common examples that people associate with virtual assets. However, the legal concept can be broader than traditional cryptocurrency.
Depending on the structure and purpose of the digital asset, the framework may cover different types of digital assets and services involving them.
This is why businesses should not assume that the law applies only to Bitcoin or other well-known cryptocurrencies.
The legal question is not simply:
“Is this Bitcoin?”
The more important question is:
“What exactly is the digital asset or service, and does it fall within the regulatory framework?”
The Virtual Assets Act applies to Virtual Asset Service Providers (VASPs) operating in or from Pakistan and to certain issuers of virtual assets.
The Act also excludes certain closed-loop or closed-ecosystem digital representations that meet specified conditions. For example, the legislation addresses digital tokens that are restricted to a particular platform or ecosystem and cannot be transferred outside it or exchanged for legal tender outside that ecosystem.
Therefore, businesses developing a token, digital wallet, exchange, payment solution or blockchain-based product should examine the legal structure carefully instead of assuming that every digital token is treated in exactly the same way.
What Is the Virtual Assets Act, 2026?
The Virtual Assets Act, 2026 is Pakistan’s dedicated federal legislation dealing with virtual assets and Virtual Asset Service Providers.
The Act is listed in the Pakistan Code as Act XIII of 2026, with a promulgation date of 4 March 2026.
Its purpose includes establishing an authority for:
- licensing virtual-asset businesses;
- regulating Virtual Asset Service Providers;
- supervising relevant activities;
- protecting consumers and investors;
- improving market transparency;
- maintaining market integrity;
- addressing money laundering;
- preventing terrorist financing and proliferation financing; and
- dealing with other unlawful activities involving virtual assets.
PVARA describes the framework as being aligned with international Anti-Money Laundering and Counter-Terror Financing standards.
This is important because virtual assets can move across borders quickly. A regulatory framework therefore cannot focus only on the buying and selling of cryptocurrency. It also has to consider who is providing the service, who the customer is, where funds are coming from, where they are going, and whether transactions present financial-crime risks.
Is Cryptocurrency Now Legal in Pakistan?
This is one of the most common questions.
The answer needs some explanation.
It would be inaccurate to simply say:
“Crypto is completely legal now.”
The new law creates a legal and regulatory framework for virtual assets and the businesses providing virtual-asset services. It does not mean that every cryptocurrency-related activity is automatically permitted without regulation.
The Act creates a licensing system, and PVARA is responsible for supervising relevant service providers.
PVARA states that all Virtual Asset Service Providers must obtain a formal licence before offering services in Pakistan.
So the important distinction is between:
owning or dealing with a virtual asset as an individual and
operating a business that provides regulated virtual-asset services.
The second category is subject to a much more formal regulatory framework.
Anyone planning to establish a crypto exchange, custody business, virtual-asset platform, brokerage-type service or another regulated virtual-asset business should therefore obtain legal and regulatory advice before starting operations.
What Is a Virtual Asset Service Provider (VASP)?
A Virtual Asset Service Provider, commonly called a VASP, is a person or business providing services relating to virtual assets that fall within the regulatory framework.
The exact classification depends on the nature of the service.
Examples can include businesses involved in activities such as:
- exchange of virtual assets;
- transfer of virtual assets;
- custody or safekeeping;
- arrangements relating to virtual assets;
- issuance-related activities; and
- other services falling within the statutory framework.
PVARA has developed a licensing framework around these activities.
The regulator’s current framework provides different routes depending on the applicant and its proposed activity, including a regulatory sandbox route and an NOC-to-licence route.
This is particularly relevant to technology companies.
A company may think that it is simply developing a software platform. However, if that platform actually enables regulated virtual-asset services, it may come within PVARA’s regulatory framework.
That is why the legal analysis should be done before launching the platform, rather than after the business has already started operating.
Who Regulates Virtual Assets in Pakistan?
The new framework establishes the Pakistan Virtual Assets Regulatory Authority (PVARA).
PVARA is responsible for licensing, regulating and supervising Virtual Asset Service Providers in Pakistan.
Its responsibilities include matters such as:
- licensing;
- regulatory supervision;
- compliance;
- consumer protection;
- market integrity;
- AML/CFT requirements;
- monitoring regulated entities; and
- regulatory action against non-compliant activities.
PVARA’s website currently provides a regulatory framework containing the Virtual Assets Act, 2026, licensing information, regulatory documents and related guidance.
For a business entering this sector, PVARA is therefore one of the most important regulatory bodies to understand.
Why Was a New Virtual Assets Law Needed?
For many years, virtual assets developed faster than traditional legal systems.
Technology allowed people to transfer value electronically across borders without using conventional financial institutions in every transaction.
That created both opportunities and legal concerns.
Some of the major concerns include:
1. Money laundering
Digital assets can potentially be used to move funds through multiple wallets and platforms.
2. Terrorist financing
Financial regulators need mechanisms to identify and prevent the misuse of financial systems for prohibited purposes.
3. Fraud
Consumers can lose money through fraudulent investment schemes, fake exchanges, impersonation and other scams.
4. Consumer protection
Unlike traditional bank accounts, digital wallets and virtual assets may operate under very different structures.
5. Lack of transparency
A customer may not always know who controls a platform or where assets are actually held.
6. Cross-border transactions
Virtual assets can be transferred internationally, making compliance with financial and foreign-exchange requirements important.
7. Business uncertainty
Companies may hesitate to build legitimate businesses when the applicable regulatory framework is unclear.
The new law attempts to address these concerns by introducing a formal regulatory structure.
The Role of Licensing
Licensing is one of the most important parts of the new framework.
A business cannot simply establish a virtual-asset service and assume that it can operate without regulatory approval.
PVARA states that VASPs must obtain a formal licence before providing services in Pakistan.
The current regulatory structure includes routes such as:
Regulatory Sandbox
A business developing an innovative virtual-asset product may be able to test the product under regulatory supervision through the sandbox framework.
NOC to Licence
For certain applicants, the process involves obtaining an NOC and then completing the required regulatory and corporate steps before obtaining the formal VASP licence.
PVARA describes the NOC-to-licence process as including:
- NOC application;
- issuance of NOC;
- regulatory compliance;
- local incorporation; and
- VASP licence application.
This means that establishing a virtual-asset business is not simply a matter of registering a company with SECP and opening a website.
The business may have several regulatory requirements that must be addressed before it can legally provide regulated services.
Can a Pakistani Company Start a Crypto Exchange?
A company interested in starting a crypto exchange in Pakistan should not begin operations first and think about licensing later.
A crypto exchange can involve several regulated functions, including buying, selling, exchanging, transferring and potentially holding virtual assets for customers.
Under the new framework, those activities may bring the business within the VASP regime.
PVARA’s current framework states that VASPs must be licensed before offering regulated services.
Therefore, a company considering a crypto exchange should first examine:
- the proposed business model;
- ownership structure;
- corporate structure;
- source of capital;
- customer onboarding process;
- custody arrangements;
- technology infrastructure;
- cybersecurity;
- AML/KYC systems;
- transaction monitoring;
- data protection;
- record keeping;
- tax compliance;
- banking arrangements; and
- PVARA licensing requirements.
A legal review at the planning stage can prevent expensive restructuring later.
KYC and Customer Verification
One of the major changes brought by the regulatory framework is the importance of Know Your Customer (KYC) procedures.
A regulated virtual-asset business cannot simply allow customers to open accounts without appropriate identity checks.
PVARA’s regulatory framework requires licensed VASPs to conduct customer due diligence and ongoing monitoring.
In practical terms, this can involve collecting and verifying information such as:
- customer’s identity;
- identification documents;
- address;
- source of funds;
- nature of the customer’s activities;
- risk profile; and
- transaction history.
The precise requirements depend on the applicable regulations and the nature of the business.
For a company operating a virtual-asset platform, KYC is therefore not just an administrative formality.
It becomes part of the company’s legal compliance system.
Anti-Money Laundering Requirements
AML compliance is one of the central elements of Pakistan’s new virtual-asset framework.
PVARA expressly identifies AML/CFT compliance as a major part of its regulatory framework.
A licensed VASP may need systems for:
- customer due diligence;
- transaction monitoring;
- risk assessment;
- suspicious transaction reporting;
- sanctions screening;
- record keeping; and
- internal compliance procedures.
The objective is straightforward:
A legitimate virtual-asset business should be able to identify suspicious activity and respond appropriately.
PVARA’s published framework states that regulated entities must maintain records of transactions and customer information for at least 10 years, and that suspicious transactions or activities must be reported to the Financial Monitoring Unit as required.
This has an important practical consequence.
A virtual-asset company should not wait until a regulator asks for records before creating a proper record-keeping system.
Compliance needs to be built into the business from the beginning.
Can Banks Deal With Crypto Businesses?
This is another area where the legal position has developed significantly.
The State Bank of Pakistan issued BPRD Circular Letter No. 10 of 2026 concerning bank accounts for PVARA NOC holders, licensed VASPs and their customers.
The circular states that the previous 2018 instructions concerning prohibition of dealing in virtual currencies/tokens were replaced in light of the Virtual Assets Act, 2026.
However, banking access is not unrestricted.
For example, banks dealing with licensed VASPs must undertake appropriate due diligence and verify the relevant PVARA licence.
The SBP framework also provides for specific client-money accounts in applicable cases, with segregation of client funds from VASP funds.
This is an important point:
The new law does not mean that every crypto business automatically receives normal banking facilities.
The business must still satisfy the applicable regulatory, AML, banking and foreign-exchange requirements.
What About Foreign Exchange Rules?
Virtual assets can involve cross-border transactions.
A Pakistani customer may interact with a platform outside Pakistan. A Pakistani company may have foreign customers. A VASP may need to receive or make international payments.
These transactions can therefore raise foreign-exchange questions.
The SBP’s 2026 instructions expressly state that banks remain responsible for compliance with applicable SBP regulations, including foreign-exchange regulations, even when dealing with VASPs.
Therefore, a business should not assume:
“It is cryptocurrency, so ordinary foreign-exchange rules do not apply.”
That would be a risky approach.
Cross-border virtual-asset arrangements should be reviewed under the applicable financial, foreign-exchange and regulatory requirements.
What Does the Law Mean for Individual Crypto Investors?
The position of an individual investor needs to be distinguished from that of a commercial VASP.
If a person owns virtual assets for investment or personal purposes, that does not automatically make the person a VASP.
The VASP regime is primarily directed toward persons providing regulated virtual-asset services.
However, individual investors should not assume that personal crypto activity has no legal or tax implications.
Investors should maintain proper records of:
- purchases;
- sales;
- transfers;
- wallet addresses;
- exchange statements;
- deposits;
- withdrawals;
- transaction dates;
- transaction values;
- fees; and
- evidence showing the source of funds.
Good records become particularly important when a person later needs to explain the source of wealth or income.
What About Freelancers Receiving Crypto Payments?
This is becoming an important practical question.
Suppose a Pakistani freelancer provides software development, design, consulting or another service to a foreign client.
Instead of receiving payment through a conventional bank transfer, the freelancer receives a virtual asset.
Does receiving cryptocurrency automatically make the income tax-free?
No one should make that assumption.
The Virtual Assets Act contains a specific tax-compliance provision for licensed VASPs. It requires every licensed VASP to comply with obligations under the Income Tax Ordinance, 2001 and relevant FBR rules and regulations.
More broadly, the tax treatment of income should be considered under the applicable Pakistani tax laws.
FBR currently publishes the Income Tax Ordinance, 2001 in versions updated for the 2026 amendments.
Therefore, a freelancer should keep evidence of:
- the service provided;
- invoice or agreement;
- amount received;
- date received;
- value of the virtual asset at the relevant time;
- wallet/exchange records;
- conversion into Pakistani rupees or another currency; and
- subsequent sale or transfer.
The exact tax treatment depends on the facts and applicable tax provisions.
Is Crypto Income Taxable in Pakistan?
This is an area where people should be careful.
The Virtual Assets Act does not create a simple blanket statement such as:
“All cryptocurrency profits are taxed at X%.”
Instead, the Act requires licensed VASPs to comply with existing income-tax obligations and FBR rules.
Therefore, the correct approach is to examine the person’s or business’s actual circumstances under the applicable tax law.
For example, there can be differences between:
- a person investing personally;
- a person regularly trading as a business;
- a company operating a crypto platform;
- a freelancer receiving payment in virtual assets;
- a VASP charging customers service fees; and
- a company issuing or arranging virtual assets.
The source and nature of income matter.
FBR’s current withholding-tax materials also show that the Pakistani tax system continues to be updated through Finance Act changes, so tax treatment should be checked against the law applicable to the relevant tax year.
For businesses, tax planning should therefore be part of the legal structure from the beginning.
Sales Tax and Virtual Asset Businesses
Another question businesses often ask is whether virtual-asset services can involve sales tax or provincial sales tax.
This requires a distinction between:
the virtual asset itself and
a service provided by a business involving that asset.
A business may charge a fee, commission, spread or other consideration for providing a service.
The applicable tax treatment depends on the nature of the service, the taxpayer, the jurisdiction and the relevant tax legislation.
This is particularly important because tax laws can change through annual Finance Acts and provincial legislation.
Therefore, a virtual-asset business should not rely on a general statement that “crypto is not subject to sales tax.”
The actual service and applicable tax law must be examined.
For HS Law Associates, this is an area where a proper tax and regulatory review can be offered to businesses entering the virtual-asset sector.
What About Stablecoins?
Stablecoins have received particular regulatory attention because they can be used for payments, transfers and cross-border transactions.
PVARA issued an advisory in April 2026 concerning virtual-asset-related announcements and activities, including stablecoin use cases for remittances and cross-border payments.
The advisory states that activities involving the issuance, transfer, custody, exchange or arrangement of virtual assets, including stablecoins and certain blockchain-based solutions, may fall within PVARA’s regulatory framework.
This is important for businesses considering stablecoins as part of:
- payment systems;
- remittance products;
- international settlements;
- digital wallets;
- financial technology platforms; or
- blockchain-based business models.
A business should obtain regulatory advice before launching such a product.
Can Businesses Use Blockchain Technology Without a Crypto Licence?
Not every blockchain project is automatically a regulated virtual-asset business.
For example, a company may use blockchain technology for:
- internal record keeping;
- supply-chain tracking;
- document verification;
- authentication;
- database systems; or
- other technological purposes.
The legal analysis changes when the technology is used to provide a regulated virtual-asset service.
Therefore, the relevant question is not simply:
“Does the company use blockchain?”
The better question is:
“What service is the company actually providing, and does that service fall within the Virtual Assets Act?”
This distinction is particularly important for software companies and startups.
PVARA’s regulatory approach is described as technology-neutral, meaning that the regulatory framework is concerned with the activity rather than simply the technology used.
What Happens If a Business Operates Without the Required Approval?
This is an important issue for anyone planning to enter the sector.
A person cannot simply start providing regulated virtual-asset services in Pakistan and assume that registration can be completed later.
The regulatory framework requires licensing for VASPs, and PVARA has also issued guidance concerning transitional persons.
PVARA currently states that persons operating before 5 March 2026 were required to submit the relevant NOC application by 5 September 2026 or cease operations, in accordance with the transitional provisions of the Act.
For new businesses, the safer approach is to obtain regulatory advice before commencing regulated operations.
The consequences of operating outside the framework can include regulatory action and other legal consequences depending on the activity and circumstances.
What Does “NOC” Mean in the PVARA Framework?
NOC means No Objection Certificate.
It is important to understand that an NOC should not automatically be treated as equivalent to a final VASP licence.
PVARA describes the NOC as a preliminary stage in the licensing process.
Its FAQ explains that an NOC allows an applicant to proceed with the formal VASP licensing process and serves as a prerequisite for certain subsequent steps.
The general NOC-to-licence route can therefore involve:
NOC → regulatory requirements → incorporation/other formalities → licence
The exact process depends on the applicant and the applicable regulatory framework.
Regulatory Sandbox for Virtual Asset Businesses
One useful part of the framework is the regulatory sandbox.
A startup may have a new product but may not yet be ready to operate on a full commercial scale.
The sandbox provides a controlled environment in which an innovative virtual-asset product can be tested under regulatory supervision.
PVARA currently describes the sandbox route as allowing businesses to test innovative virtual-asset products under supervision before seeking a full licence.
This can be useful for businesses developing:
- digital wallets;
- blockchain payment solutions;
- tokenization products;
- stablecoin-related applications;
- virtual-asset platforms; or
- other innovative products.
However, participation in a sandbox should not be interpreted as permission to operate an unrestricted commercial crypto business.
The applicant must follow the conditions imposed under the relevant regulatory framework.
Consumer Protection
One of the most important reasons for regulating virtual assets is consumer protection.
Imagine someone deposits money with a platform and later discovers that:
- the company has no proper custody system;
- customer funds are mixed with company funds;
- the company has inadequate security;
- the platform cannot process withdrawals;
- there is no proper complaint mechanism; or
- the company’s ownership and management are unclear.
A regulatory framework can help address these risks.
PVARA identifies investor protection, consumer protection and market integrity as important parts of the regulatory framework.
However, consumers should still exercise caution.
A licence does not mean that the value of a cryptocurrency cannot fall.
It does not eliminate investment risk.
It does not guarantee profit.
And it does not mean every virtual asset is safe.
Regulation and investment safety are related, but they are not the same thing.
Cybersecurity and Data Protection
Virtual-asset businesses operate almost entirely through digital systems.
This creates cybersecurity risks.
A virtual-asset platform may hold:
- customer identity information;
- financial information;
- transaction history;
- wallet information;
- account credentials; and
- other sensitive data.
A security breach can therefore have serious consequences.
PVARA’s regulatory framework specifically refers to secure handling of personal and financial data and appropriate cybersecurity measures.
Businesses should therefore consider:
- access controls;
- authentication;
- encryption;
- secure storage;
- incident response;
- employee access;
- audit trails;
- backup systems; and
- cybersecurity policies.
For a VASP, cybersecurity is not merely an IT issue. It can become a legal and regulatory compliance issue.
Record Keeping
Proper record keeping is particularly important in the virtual-asset sector.
A transaction can involve several digital addresses, exchanges and transfers.
Without proper records, it may become difficult to explain where money came from or where it went.
PVARA’s regulatory framework states that regulated VASPs must maintain comprehensive records of transactions and customer information for at least 10 years.
Businesses should therefore establish record-retention policies from the beginning.
Individuals should also maintain their own transaction records, particularly if they have significant virtual-asset activity.
Can Crypto Transactions Be Used in Court?
Virtual-asset disputes can potentially involve a range of digital evidence, such as:
- transaction records;
- exchange statements;
- wallet addresses;
- blockchain transaction IDs;
- emails;
- WhatsApp conversations;
- contracts;
- invoices;
- screenshots;
- platform records; and
- other electronic records.
The admissibility and evidentiary value of such material will depend on the facts and the applicable Pakistani law governing evidence and electronic records.
This is one reason businesses should preserve original records rather than relying only on screenshots.
A person involved in a dispute should obtain legal advice before deleting, altering or moving potentially relevant digital records.
Crypto Fraud and Scams
The introduction of regulation does not eliminate cryptocurrency fraud.
People can still be targeted by:
- fake investment schemes;
- fake exchanges;
- impersonation;
- Ponzi schemes;
- fraudulent token offerings;
- fake wallets;
- phishing;
- account theft;
- social-media scams; and
- fraudulent promises of guaranteed returns.
One of the biggest warning signs is a promise that an investment will produce a guaranteed or unusually high return.
People should also be cautious when someone asks them to transfer funds to a personal wallet without proper documentation.
Before investing a significant amount, an investor should verify:
- who operates the platform;
- whether the business is appropriately regulated;
- where the company is incorporated;
- how customer funds are held;
- whether there is a proper customer agreement;
- what withdrawal rules apply; and
- what legal remedies are available if something goes wrong.
Legal Contracts for Crypto Businesses
A virtual-asset business should not operate only through a website and an app.
It should have proper legal documentation.
Depending on the business model, this may include:
Terms and Conditions
Explaining how the platform works and what customers agree to.
Privacy Policy
Explaining how customer information is collected and handled.
Risk Disclosure
Explaining the risks associated with virtual assets.
Customer Agreement
Setting out the rights and obligations of the customer and the service provider.
Custody Agreement
Where the business provides custody services.
Vendor Agreements
For third-party technology providers.
Employment and Consultant Agreements
For employees and consultants working on the platform.
AML/KYC Policies
Documenting the company’s compliance procedures.
Complaint Handling Policy
Explaining how customers can raise complaints.
A proper legal structure is especially important when the business intends to operate internationally.
What Should a New Crypto Business Do Before Starting?
A business considering entry into Pakistan’s virtual-asset sector should ideally follow a structured process.
Step 1 — Define the business model
Write down exactly what the company intends to do.
For example:
“We will operate a platform allowing customers to buy and sell virtual assets.”
or:
“We will provide custody services.”
The more precise the description, the easier the legal classification becomes.
Step 2 — Identify whether the activity is regulated
The business should determine whether its proposed activities fall within the Virtual Assets Act and PVARA framework.
Step 3 — Review the corporate structure
The company may need an appropriate Pakistani corporate structure and regulatory setup.
Step 4 — Prepare compliance policies
KYC, AML, transaction monitoring and record-keeping procedures should be developed.
Step 5 — Assess tax obligations
Income tax, withholding tax, sales tax/service tax and other relevant tax matters should be reviewed based on the actual business model.
Step 6 — Review banking arrangements
The company should determine how its accounts and customer funds will be handled in accordance with SBP and PVARA requirements.
Step 7 — Apply for the relevant regulatory approval
Depending on the business, this may involve a sandbox, NOC or licence route.
Step 8 — Prepare customer documentation
The company should have appropriate contracts, disclosures, privacy documents and policies.
Step 9 — Establish cybersecurity controls
The business should protect customer and financial information.
Step 10 — Start operations only after satisfying applicable requirements
This is perhaps the most important point.
Do not start regulated operations first and try to regularize the business later.
What Does the New Law Mean for Pakistani Businesses?
The new framework may create opportunities for businesses that want to operate openly and within a regulated system.
Technology companies can explore blockchain-related products.
Financial technology businesses can examine virtual-asset-related services.
Existing businesses can consider whether their current activities fall within the new regulatory framework.
But opportunity also comes with responsibility.
Businesses now need to think about:
licensing + tax + AML + KYC + banking + cybersecurity + contracts + corporate structure + reporting.
A business that focuses only on the technology and ignores the legal side may face problems later.
What Does It Mean for Overseas Pakistanis?
Overseas Pakistanis may also be interested in the new framework because virtual assets frequently involve international transactions.
An overseas Pakistani may:
- hold virtual assets abroad;
- invest through an overseas platform;
- send funds to Pakistan;
- receive funds from Pakistan;
- own a company involved in blockchain technology; or
- consider establishing a virtual-asset business in Pakistan.
These arrangements may involve multiple legal systems.
Questions can arise regarding:
- tax residency;
- source of income;
- foreign exchange;
- remittances;
- corporate structure;
- beneficial ownership;
- reporting obligations; and
- applicable laws in both countries.
Therefore, cross-border virtual-asset arrangements should be reviewed on a case-by-case basis.
The Importance of Tax and Legal Records
One of the biggest practical lessons for virtual-asset users is simple:
Keep your records.
Do not rely on an exchange account alone.
Maintain:
- purchase records;
- sale records;
- wallet records;
- transaction IDs;
- bank statements;
- exchange statements;
- invoices;
- contracts;
- proof of source of funds;
- tax records; and
- evidence of business expenses where relevant.
If a person later receives a tax notice or faces a dispute concerning the source of funds, these documents may become extremely important.
Is the Virtual Assets Act the Only Law That Matters?
No.
The Virtual Assets Act is the central legislation specifically dealing with virtual assets, but a virtual-asset business may also have obligations under other Pakistani laws.
Depending on the circumstances, these can include:
- income tax laws;
- sales tax/service tax laws;
- anti-money laundering laws;
- company law;
- banking regulations;
- foreign-exchange regulations;
- cybercrime laws;
- electronic transaction and evidence laws;
- consumer protection laws; and
- contractual and civil laws.
For example, the SBP’s 2026 circular expressly refers to compliance with the Anti-Money Laundering Act, 2010 and applicable SBP regulations in the banking relationship with VASPs.
This is why a crypto business should not treat the Virtual Assets Act as a standalone document.
The business needs a broader legal and compliance review.
What About PECA and Cybercrime?
Virtual-asset businesses operate through digital systems, so cybercrime laws can also become relevant.
A virtual-asset platform could potentially face issues involving:
- unauthorized access;
- hacking;
- identity theft;
- online fraud;
- misuse of electronic information;
- cyber harassment;
- theft of credentials; or
- other unlawful digital activities.
The exact legal provision will depend on the conduct and circumstances.
A business should therefore maintain cybersecurity procedures and have a response plan for cyber incidents.
If a customer becomes a victim of an online crypto scam, legal remedies may potentially involve more than one authority depending on the facts.
What Should Investors Be Careful About?
Even with the new regulatory framework, an investor should remember five basic points.
1. Regulation does not mean guaranteed profit.
Virtual assets can be highly volatile.
2. Do not trust every online platform.
Check the legal identity and regulatory position of the service provider.
3. Keep transaction records.
Do not depend entirely on an exchange.
4. Do not ignore tax matters.
Income and business activities can have tax consequences.
5. Take legal advice before establishing a crypto business.
The cost of obtaining advice at the beginning can be much lower than the cost of correcting a regulatory problem later.
What Businesses Should Know About the Current Regulatory Position
The virtual-asset regulatory framework is still developing.
PVARA has published regulations and activity-specific regulatory material, and its regulatory framework page currently lists the Pakistan Virtual Asset Services Regulations, 2026 and Pakistan Virtual Asset Services Activity Specific Regulations, 2026, both notified on 21 August 2026.
This is important because the legal environment is not something businesses should treat as permanently fixed.
Regulations, procedures and guidance can be updated.
A company operating in this sector should therefore monitor:
- PVARA notifications;
- PVARA regulations;
- SBP instructions;
- FBR tax developments;
- AML requirements;
- corporate requirements; and
- relevant changes in Pakistani legislation.
A Practical Example
Consider a hypothetical company called ABC Digital Exchange (Pvt.) Ltd.
The company wants to establish an online platform in Pakistan where customers can buy and sell virtual assets.
The company may need to consider:
Corporate structure:
How will the company be incorporated and owned?
Regulatory classification:
Does the proposed service fall within the VASP framework?
PVARA:
What approval, NOC or licence is required?
KYC:
How will customers be verified?
AML:
How will suspicious transactions be detected and reported?
Banking:
How will customer funds be handled?
Tax:
What income-tax and other tax obligations apply?
Contracts:
What will customers agree to?
Cybersecurity:
How will wallets, customer accounts and personal information be protected?
Record keeping:
How will transaction records be retained?
Complaints:
What happens when a customer claims that funds have been lost?
This example shows why crypto law is not only about cryptocurrency.
It is also about corporate law, tax law, banking regulation, compliance, contracts, cybersecurity and financial crime prevention.
What Should a Person Do If They Already Operate a Crypto Business?
If a person or company was already operating a virtual-asset-related business before the new framework, they should not assume that the business automatically continues without action.
PVARA has specifically addressed transitional persons and states that persons operating on or before 5 March 2026 had to submit an NOC application by 5 September 2026 or cease operations under the relevant transitional provisions.
An existing operator should therefore review:
- its current business model;
- whether it falls within the definition of a VASP;
- its corporate structure;
- existing customer arrangements;
- AML/KYC policies;
- banking arrangements;
- tax registrations;
- contracts;
- data-security procedures; and
- PVARA requirements.
Where there is uncertainty, professional legal advice should be obtained rather than relying on informal interpretations found on social media.
What Should a Customer Do Before Using a Virtual-Asset Platform?
Before transferring money or virtual assets to a platform, a customer should consider:
Verify the company
Find out who owns and operates the platform.
Check its regulatory status
Where the activity requires PVARA authorization, verify the relevant status.
Read the terms
Do not simply click “I Agree.”
Understand withdrawal rules
Know when and how you can withdraw your funds.
Check fees
Understand trading, withdrawal and other charges.
Protect your account
Use strong authentication and never share passwords or private keys.
Keep your own records
Download transaction statements and retain relevant evidence.
These simple steps can reduce legal and financial risks.
What Is the Future of Crypto Regulation in Pakistan?
The Virtual Assets Act represents a significant change in Pakistan’s approach to digital assets.
Instead of leaving the sector outside a dedicated regulatory structure, Pakistan now has:
- a dedicated regulator;
- a licensing system;
- AML/KYC requirements;
- regulatory supervision;
- consumer-protection objectives;
- banking guidance for regulated VASPs;
- tax-compliance requirements; and
- regulatory pathways for new businesses.
At the same time, the framework is still developing.
Businesses should expect further regulatory guidance and should monitor changes rather than relying only on the original Act.
PVARA itself continues to publish regulatory material and updates concerning licensing, compliance and virtual-asset activities.
Final Thoughts
The Virtual Assets Act, 2026 is an important development for Pakistan’s legal and financial system.
But it should not be misunderstood as a simple statement that:
“Crypto is now completely legal and anyone can start a crypto business.”
The actual position is more structured.
Pakistan has created a regulatory framework for virtual assets and the businesses providing virtual-asset services. PVARA is responsible for licensing and supervision, while other authorities and laws continue to play a role in areas such as taxation, banking, foreign exchange, AML and cybercrime.
For an individual investor, the most important steps are to understand the platform being used, maintain proper records and consider applicable tax obligations.
For a freelancer receiving virtual assets as payment, proper income and transaction records are particularly important.
For a company planning to establish a crypto exchange, wallet, custody service, stablecoin solution or another virtual-asset business, legal and regulatory planning should happen before operations begin.
The virtual-asset sector is no longer something businesses can treat as an area with no legal framework.
It is now an area where licensing, compliance, taxation, contracts, cybersecurity and regulatory advice all matter.
For businesses considering entering this sector, getting the legal structure right at the beginning can help avoid much bigger problems later.
Disclaimer
This article is intended for general legal and informational purposes only and should not be treated as specific legal, tax or investment advice. The application of the Virtual Assets Act, 2026 and related regulations may depend on the nature of the virtual asset, the business model, the person’s status, the transaction and other facts. Tax treatment should also be assessed under the applicable Pakistani tax laws and the relevant tax year. Businesses and individuals should obtain professional legal and tax advice before taking action.