Written by: FinTax

1 Introduction

In March 2026, the National Assembly of Pakistan passed the Virtual Assets Act 2026 (referred to as "the Act"), legally establishing the Pakistan Virtual Assets Regulatory Authority (PVARA) as the designated regulatory body for virtual assets in the country. The Pakistani government's attitude toward crypto assets has shifted from a complete ban to active exploration. The passage of the Act marks Pakistan's official entry into a new era of compliant regulation and sets an important benchmark for crypto asset regulation in South Asia. This paper will outline the core content of the Virtual Assets Act 2026, introduce Pakistan's crypto asset tax system and regulatory framework, analyze the implications of the Act for Pakistan, and provide compliance references for market participants.

2 Core Content of the Act

Pakistan previously enacted the Virtual Assets Ordinance 2025 on July 8, 2025, establishing a relatively comprehensive legal framework for virtual asset regulation in Pakistan. The Virtual Assets Act 2026 transforms this ordinance from "temporary legislation" into formal legislation and refines specific provisions without creating a large number of new regulations.

The Act consists of twelve chapters covering licensing and access for virtual asset service providers, customer asset segregation, anti-money laundering and counter-terrorism financing, specialized regulation of stablecoins and RWAs, market conduct norms, administrative penalties, and criminal accountability, forming a comprehensive regulatory chain from license issuance to regulatory enforcement.

2.1 Regulatory Authority: Establishment of PVARA and Its Powers

Chapter Two of the Act (Article 6) announces the establishment of the Pakistan Virtual Assets Regulatory Authority (PVARA). It is set up as an autonomous regulatory body with perpetual status and independent legal personality. Its core powers include (Articles 7-9): approving licenses for virtual asset service providers and issuers, overseeing conduct and prudential supervision; assessing and classifying digital assets based on the principle of "substance over form" to determine their regulatory applicability; formulating and enforcing requirements related to business conduct and measures against money laundering, counter-terrorism financing, and preventing other illegal activities; imposing administrative sanctions on violators, revoking licenses, and referring matters for criminal prosecution; and collaborating with domestic and international regulatory bodies to promote information sharing and coordinated action.

2.2 Market Entry: Licensing System

Chapter Three of the Act regulates the issuance of licenses for virtual asset service providers, with key provisions including (Articles 18-23):

(1) Regulated services: including consulting services, brokerage services, custody services, exchange services, lending services, derivatives services, asset management services, transfer services, issuance services, and mining-related services.

(2) Application process: Applicants must first apply to PVARA for a No-Objection Certificate, and after completing company registration, apply for a formal license.

(3) Standards for suitability: controlling persons, promoters, CEOs, directors, and other key individuals must meet the suitability standards established by PVARA, and these standards are ongoing.

(4) Types of licenses: PVARA may issue formal licenses or, depending on the circumstances, issue temporary or limited-range licenses.

(5) Public registry: PVARA maintains and publicly discloses a directory of licensed entities on its official website, listing names, license numbers, types of licensed services, and current regulatory status.

2.3 Regulatory Principles: Substance Over Form

Chapter One of the Act defines virtual assets (Articles 2-3) as "a digital representation of value that can be traded or transferred digitally and used for payment or investment purposes, excluding any form of legal tender, securities, or other financial assets regulated by other laws that are represented, issued, or transferred by distributed ledger technology." From the text, it is clear that virtual assets do not possess the status of legal tender. Furthermore, the assessment, determination, and classification of regulated virtual assets, regulated virtual asset service providers, or qualified service providers are based on their substantive characteristics, underlying functions, usage methods, or economic impact, regardless of their name or structure. PVARA is endowed with the statutory authority to conduct such assessments and determinations and to consult with other relevant regulatory bodies. Thus, in scenarios involving asset qualification and license eligibility determination, the Act clarifies the "substance over form" regulatory principle.

2.4 Core Obligations and Legal Responsibilities

The Act stipulates the general obligations of virtual asset service providers, mainly including: (1) operating under license and continuously fulfilling related obligations. For instance, maintaining the statutory minimum paid-in capital and financial resources, regularly submitting declaration forms and financial statements, and obtaining prior approval for significant changes in control or operations; (2) customer asset segregation, storing customer assets separately from their own assets in independent accounts, and without valid written consent, they may not engage in re-mortgaging, lending, pledging, or providing other guarantees; implementing key management control measures that meet standards; (3) fulfilling anti-money laundering and counter-terrorism financing obligations, including customer due diligence, suspicious transaction reporting, and record-keeping obligations. Additionally, special provisions for the issuance of fiat-pegged tokens and asset-backed tokens, virtual asset custody services, mining services, and other business scenarios are included in the Act.

Chapter Ten further clarifies the types of violations and their penalties (Articles 54-61). For example, providing virtual asset services without permission may result in up to 5 years of imprisonment and a fine of 50 million rupees (approximately 1.15 million RMB); should systemic threats, market manipulation, fraud, cybersecurity vulnerabilities, or other risks jeopardizing customer or market integrity arise, the regulatory authority may issue orders to temporarily suspend specific services or freeze related assets. Besides criminal prosecution and emergency intervention by the regulatory authority, violations of the Act may also trigger fines, license revocation, and other administrative sanctions.

3 Pakistan's Crypto Tax System and Regulation

3.1 Evolution of Crypto Regulation

Pakistan's regulation of crypto assets has undergone a clear evolution from a complete ban to gradual relaxation. In 2018, the State Bank of Pakistan issued a ban prohibiting financial institutions from participating in virtual currency transactions, placing crypto assets in a legal gray area. During this phase, there was a lack of dedicated legislation, and informal channels primarily facilitated civil transactions. As the global crypto market developed and domestic digitalization demands increased, the absolute ban became unsustainable. In 2023, the central bank initiated a feasibility study for central bank digital currency; in 2024, the government commenced systematic research on the application of stablecoins and RWAs, laying the groundwork for subsequent legislation. The regulatory stance shifted from a "one-size-fits-all ban" to a pragmatic route of "researching regulations." In 2025, the Pakistan Cryptocurrency Committee (PCC) was formally established, promoting the institutional development of the crypto industry at the governmental level. The Virtual Assets Ordinance 2025 first established a comprehensive regulatory framework for virtual assets in July 2025. The Virtual Assets Act 2026 was officially passed in March 2026, establishing PVARA as a permanent regulatory body, marking the official start of a new era of compliant operations.

3.2 Current Regulatory Landscape

Currently, Pakistan has formed a layered regulatory framework with PVARA as the leading authority, working collaboratively with the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP). Specifically, the Act assigns core responsibilities to PVARA for licensing, regulating, and supervising virtual assets and virtual asset service providers, emphasizing alignment with international standards through key requirements such as anti-money laundering, counter-terrorism financing, and cybersecurity. For tokens with securities characteristics, the SECP retains its existing regulatory authority; issues related to foreign exchange management and payment systems need coordination with the SBP. In terms of regulatory power distribution, PVARA possesses rule-making authority, licensing authority, administrative enforcement authority, and investigative authority. Article 9 of the Act explicitly grants PVARA the power to assess, determine, and classify any virtual asset and to consult with SBP, SECP, and other institutions, meaning that whether an asset falls under regulation and which authority oversees it is determined through collaborative negotiation among the institutions based on the principle of "substance over form."

3.3 Crypto Asset Taxation

Regarding taxation, Pakistan currently has not enacted separate tax legislation for crypto assets but has chosen to incorporate them into the existing tax system. The Act stipulates that virtual asset service providers must comply with the obligations outlined in the Income Tax Ordinance 2001 and the rules and regulations issued by the Federal Board of Revenue (FBR). In the absence of specific regulations, crypto-related income may be classified under the existing income tax framework based on "fact classification/nature judgment," but specific classification and taxation will still depend on subsequent legislation, official interpretations, and individual case facts. Reports also indicate that the FBR is conducting consultations and research on crypto taxation and legislative paths.

4 Compliance Responses from Market Participants

Although the Virtual Assets Act 2026 has just taken effect, this Act has unprecedentedly clarified the regulatory landscape for crypto in Pakistan, making it a policy window for market participants intending to enter the Pakistani market to improve their compliance systems.

For issuers, on the one hand, they need to assess whether their services fall within the scope of virtual asset regulation based on the substantive characteristics, fundamental functions, usage methods, or economic impact of the assets involved, or whether they are actually encompassed within securities or other regulatory categories to determine the applicable regulatory framework. On the other hand, if they are included under virtual asset regulation, they must meet different special regulatory requirements based on the asset characteristics. Issuing fiat-pegged tokens requires adherence to 100% reserve support and establishing a mechanism for redemption at face value; issuing asset-pegged tokens necessitates reserving sufficient underlying assets; algorithmic tokens are prohibited from issuance.

For virtual asset service providers (VASP), it is noteworthy that the Act sets transitional provisions for existing virtual asset service providers (Article 70). Service providers that have commenced virtual asset services before the Act came into effect must complete the full license application within six months of the Act's enforcement. Before formal license issuance, they must fulfill the core obligations stipulated by the Act (especially anti-money laundering, counter-terrorism financing, and customer fund protection) to continue providing services during the application period; otherwise, they risk operational suspension.

For investors, the public registry system provides a channel to verify the licensing status of trading platforms, custodians, and other service providers. Before accessing services, they can verify through PVARA's official website whether the service platform holds a valid license, thereby avoiding financial risks. Additionally, it is essential to enhance tax compliance awareness, pay attention to updates on tax policies related to crypto transactions, and retain complete transaction records, such as transaction time, counterparties, prices, and quantities, for future declaration use.

5 Conclusion

In conclusion, the significance of Pakistan's Virtual Assets Act 2026 lies not in creating an entirely new regulatory system, but rather in formalizing and normalizing the previously established regulatory framework and promoting the real implementation of the legal provisions through the PVARA as a dedicated agency. For practitioners and investors in Pakistan's crypto market, the clarity of the regulatory framework presents both opportunities and challenges. The safety of investors' assets and data privacy are ensured by the system, while practitioners can assess their compliance costs and business models within clearer regulatory boundaries. However, as Pakistan's virtual asset regulation moves to the next phase, the compliance response capabilities of market participants are facing new challenges.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。