Regulating Digital Currencies & Fintech in Pakistan — 2025 Guide

A practical, neutral guide for founders, bankers, lawyers and policy watchers: where regulation stands in 2025, which authorities matter, compliance steps, and key legal risks to plan for.

Quick summary

Pakistan’s fintech regulation is developing rapidly. Regulators have created sandboxes and sectoral frameworks to encourage innovation, while the legal status of privately issued cryptocurrencies remains contested and under active policy review. The central bank is piloting a central bank digital currency (CBDC) and has issued sandbox guidance to test regulated fintech solutions. 0

Key regulators and their roles

• State Bank of Pakistan (SBP): Supervises banks, payment systems, and system-wide financial stability. SBP has issued warnings in the past on virtual currencies and in 2025 published sandbox guidelines and engaged in policy work on virtual assets. 1
• Securities & Exchange Commission of Pakistan (SECP): Regulates non-bank financial services and runs a fintech regulatory sandbox for startups and intermediaries. 2
• Federal Board of Revenue (FBR): Tax treatment of crypto/fintech receipts and VAT/sales tax on digital services (monitor FBR guidance for cross-border income). (Check FBR notices when implementing pricing or remittance models.)
• Ministry of Finance / Cabinet / Inter-Ministerial bodies: Coordinate policy, set national strategies and may form specialist bodies for digital assets or crypto policy implementation. 3

Where the law currently stands (practical view)

Background: SBP’s 2018 circular warned banks and payment operators against facilitating virtual currencies; for several years that created a de-facto prohibition on mainstream bank involvement. Since 2023–25 policy activity increased: sandboxes were formalised and the central bank started CBDC work while policy discussions on legalising/licensing virtual assets continued. However, private crypto remains legally sensitive and public statements by officials show differing positions — so operational caution is essential. 4

Recent developments to note (2024–2025)

• Regulatory sandboxes: SBP issued detailed guidelines to run a sandbox for banks and DFS providers; SECP continues to run its non-bank sandbox for fintech innovators. These sandboxes are the safe first step for testing regulated fintechs. 5
• CBDC pilot: SBP announced plans to pilot a central bank digital currency as part of broader modernization of payment rails. The CBDC project signals a priority for regulated digital money. 6
• Policy debate on private crypto: Government bodies, industry groups and experts are actively debating whether to license, tax, restrict or ban private virtual assets — expect formal legislation or consolidated guidance soon. 7

Top legal & compliance risks for fintechs and crypto projects

1. Regulatory uncertainty: Conflicting public statements and an evolving policy mean firms should avoid irreversible business models until licensing clarity is available. 8
2. AML / CFT obligations: Pakistan enforces AML/CTF standards — any payment or crypto service must plan for customer due diligence, suspicious transaction reporting, and KYC tied into banks. Non-compliance risks heavy penalties and frozen accounts.
3. Banking access: Banks remain cautious about crypto flows; regulated onboarding via sandbox or explicit SBP permissions reduces the risk of banking relationships being terminated. 9
4. Tax & FX rules: Cross-border receipts, remittances and crypto trading profits may attract FBR attention — design accounting and invoicing to support tax reporting and forex rules.
5. Consumer protection & cybersecurity: Irreversibility of blockchain transactions and custodial risks require clear terms, insurance or escrow arrangements and data/security best practices.

Practical steps for startups & investors

1. Map your product to regulated activity: Is your service a payment instrument, forex transfer, securities, or pure software? The regulatory path depends on this classification.
2. Use sandboxes: Apply to SECP or SBP sandbox programs to pilot with regulatory safeguards and limited scope — this reduces enforcement risk and helps demonstrate safety to banks. 10
3. Engage early with regulators: Seek pre-application meetings with SBP/SECP and document compliance plans (AML, cyber, custody, reconciliation).
4. Build strong KYC & AML systems: Integrate identity verification, transaction monitoring and SAR workflows compatible with Pakistan’s FIU/AML regime.
5. Plan bank partnerships: Work with compliant banks or PSPs and structure flows to avoid direct bank exposure to unlicensed virtual asset activity if still restricted.
6. Prepare governance & legal docs: Clear user terms, custody agreements, privacy policies and risk disclosures are essential — get local counsel for enforceability and consumer law compliance.

What banks and established financial institutions should consider

• Follow SBP circulars and sandbox guidance; maintain written board approvals for any fintech collaborations. 11
• Segregate any crypto-related exposures and avoid facilitating crypto transactions unless explicitly permitted by SBP/other authorities.
• Enhance transaction monitoring and AML controls where digital assets or tokenised instruments are involved.

Checklist before launching in Pakistan

• Confirm regulatory classification of your product.
• Apply to an appropriate sandbox (SBP or SECP) if applicable. 12
• Agree a bank/PSP integration plan and document KYC/AML responsibilities.
• Model tax and FX consequences with local accountants.
• Prepare an incident response plan for security breaches and a consumer dispute resolution mechanism.

Practical note: If your project relies on private crypto tokens or exchanges, treat current Pakistan policy as fluid: use regulatory engagement, pilot approaches and conservative banking flows to minimise operational exposure. 13

Official resources & further reading

• SBP — Regulatory Sandbox Guidelines (May 2025). 14
• SBP — Notes on legal status of virtual assets (May 30, 2025). 15
• SECP — Regulatory Sandbox (fintech resources). 16
• SBP BPRD Circular No. 03 of 2018 — Virtual Currencies warning. 17
• Reuters — SBP to pilot CBDC (July 2025). 18

Disclaimer: This guide summarises public policy and regulatory developments as reported by regulators and reputable media up to mid-2025. It is general information only, not legal advice. For transaction-specific compliance or licensing queries consult qualified counsel and engage directly with SBP/SECP/FBR.

Key sources cited: SBP press releases and sandbox guidelines; SECP regulatory sandbox materials; SBP 2018 circular on virtual currencies; Reuters coverage of CBDC pilot (see links above).

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