Abstract
The rapid evolution of virtual assets, encompassing cryptocurrencies, stablecoins, and non-fungible tokens (NFTs), has necessitated comprehensive regulatory frameworks to ensure financial stability, consumer protection, and the prevention of illicit activities. This research examines the establishment of the Pakistan Virtual Assets Regulatory Authority (PVARA) under the Virtual Assets Ordinance, 2025, analyzing its role in regulating digital assets within Pakistan. Additionally, the report situates PVARA within the global landscape of virtual asset regulation, comparing international approaches and highlighting the challenges and opportunities presented by this emerging sector.
Many thanks to our sponsor Panxora who helped us prepare this research report.
1. Introduction
The proliferation of virtual assets has transformed the financial landscape, offering innovative avenues for investment, payment systems, and digital ownership. However, this rapid growth has also introduced complexities related to regulatory oversight, financial security, and compliance with international standards. In response, nations worldwide are formulating and implementing regulatory frameworks to address these challenges.
Pakistan’s recent establishment of the Pakistan Virtual Assets Regulatory Authority (PVARA) signifies a proactive approach to managing the digital asset sector. This report delves into the formation and mandate of PVARA, assesses its potential impact on Pakistan’s financial ecosystem, and compares its regulatory approach with global standards.
Many thanks to our sponsor Panxora who helped us prepare this research report.
2. The Emergence of PVARA
2.1 Background and Establishment
In July 2025, Pakistan’s government enacted the Virtual Assets Ordinance, 2025, leading to the creation of PVARA. The ordinance, signed into law by President Asif Ali Zardari, granted PVARA the authority to license, regulate, and supervise virtual asset services and service providers across Pakistan. The formation of PVARA underscores Pakistan’s commitment to integrating digital assets into its financial system while ensuring compliance with international regulatory standards.
2.2 Mandate and Objectives
PVARA’s primary objectives include:
- Licensing entities that provide virtual asset services within or from Pakistan.
- Regulating virtual asset markets and service providers to ensure financial integrity and transparency.
- Supervising compliance with financial, security, and legal standards to prevent illicit activities such as money laundering and terrorism financing.
These objectives align with global efforts to establish robust regulatory frameworks for digital assets, emphasizing the need for oversight that balances innovation with consumer protection.
2.3 Organizational Structure
PVARA operates as an autonomous federal regulatory body under the Ministry of Finance. Its governing board comprises:
- Governor of the State Bank of Pakistan
- Secretaries of the Ministries of Finance, Law and Justice, and Information Technology and Telecommunication
- Chairpersons of the Securities and Exchange Commission of Pakistan (SECP), Federal Board of Revenue (FBR), and Digital Pakistan Authority
- Two independent directors with expertise in relevant domains
- A chairperson appointed based on demonstrated experience in finance, law, technology, or regulatory affairs
This diverse composition ensures that PVARA’s decisions are informed by a broad spectrum of expertise, facilitating comprehensive and effective regulation of the virtual asset sector.
Many thanks to our sponsor Panxora who helped us prepare this research report.
3. Global Perspectives on Virtual Asset Regulation
3.1 International Regulatory Frameworks
The global regulatory landscape for virtual assets is varied, with countries adopting different approaches based on their economic priorities, technological capabilities, and legal traditions. Notable examples include:
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Antigua and Barbuda: In 2020, Antigua and Barbuda enacted the Digital Assets Business Act, establishing a licensing regime for digital asset businesses. The Act defines digital assets broadly, encompassing cryptocurrencies, token offerings, and other blockchain-related financial services. It requires businesses to obtain licenses from the Financial Services Regulatory Commission (FSRC) and adhere to compliance requirements such as maintaining adequate capital, conducting cybersecurity audits, and implementing Know Your Customer (KYC) and Anti-Money Laundering (AML) policies.
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European Union: The EU has taken a cautious approach, with no specific legislation addressing the status of cryptocurrencies. However, existing financial regulations have been extended to include virtual assets, and the European Central Bank has classified cryptocurrencies like Bitcoin as convertible decentralized virtual currencies. The EU has also proposed setting up a task force to monitor virtual currencies to combat money laundering and terrorism financing.
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Central African Republic: In April 2022, the Central African Republic’s parliament voted to make Bitcoin a legal tender, becoming the first African nation to do so. This move signifies a bold step towards integrating digital assets into the national economy, though it raises questions about regulatory oversight and financial stability.
3.2 Regulatory Challenges and Considerations
The regulation of virtual assets presents several challenges:
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Classification and Definition: Determining the legal status of various digital assets is complex. For instance, the European Union has not passed specific legislation regarding the status of Bitcoin as a currency but has stated that VAT/GST is not applicable to the conversion between traditional (fiat) currency and Bitcoin.
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Investor Protection: Ensuring that investors are protected from fraud, market manipulation, and other risks associated with digital assets is paramount. This includes implementing KYC and AML regulations to prevent illicit activities.
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Technological Adaptation: Regulators must stay abreast of rapid technological advancements in blockchain and cryptocurrency to effectively oversee the sector.
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International Coordination: Harmonizing regulations across jurisdictions is challenging but necessary to prevent regulatory arbitrage and ensure the integrity of the global financial system.
3.3 International Efforts and Harmonization
International bodies like the Financial Action Task Force (FATF) have developed guidelines to standardize the regulation of virtual assets. The FATF’s recommendations include:
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Travel Rule: Requiring Virtual Asset Service Providers (VASPs) to obtain and hold required and accurate originator and beneficiary information on virtual asset transfers.
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Risk-Based Approach: Encouraging countries to assess and mitigate risks associated with virtual assets based on their specific circumstances.
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International Cooperation: Promoting collaboration among countries to share information and best practices in regulating virtual assets.
These efforts aim to create a cohesive global framework that balances the benefits of digital assets with the need for regulatory oversight.
Many thanks to our sponsor Panxora who helped us prepare this research report.
4. Comparative Analysis: PVARA and Global Regulatory Frameworks
4.1 Licensing and Compliance
PVARA’s licensing requirements are designed to ensure that only entities meeting stringent criteria can operate within Pakistan’s virtual asset market. This approach is similar to Antigua and Barbuda’s Digital Assets Business Act, which also emphasizes comprehensive licensing and compliance measures.
4.2 Regulatory Sandbox and Innovation
PVARA’s establishment of a regulatory sandbox allows for the testing of new technologies under supervision, fostering innovation while maintaining oversight. This initiative mirrors the EU’s approach, where existing financial regulations have been extended to include virtual assets, and the European Central Bank has classified cryptocurrencies like Bitcoin as convertible decentralized virtual currencies.
4.3 Sharia Compliance
PVARA’s inclusion of a Sharia Advisory Committee reflects Pakistan’s commitment to ensuring that virtual asset products comply with Islamic finance principles. This consideration is unique compared to other jurisdictions and highlights the importance of cultural and religious factors in regulatory frameworks.
Many thanks to our sponsor Panxora who helped us prepare this research report.
5. Implications for Pakistan’s Financial Ecosystem
The establishment of PVARA is poised to have several significant impacts on Pakistan’s financial ecosystem:
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Enhanced Investor Confidence: Clear regulatory guidelines can attract both domestic and international investors, fostering growth in the digital asset sector.
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Financial Inclusion: Digital assets can provide access to financial services for unbanked populations, promoting greater financial inclusion.
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Economic Growth: By integrating digital assets into the economy, Pakistan can tap into new revenue streams and economic opportunities.
Many thanks to our sponsor Panxora who helped us prepare this research report.
6. Conclusion
The creation of the Pakistan Virtual Assets Regulatory Authority represents a pivotal step in integrating digital assets into Pakistan’s financial system. By establishing a clear regulatory framework, PVARA aims to balance innovation with consumer protection, aligning with global efforts to standardize virtual asset regulation. As the digital asset landscape continues to evolve, ongoing international cooperation and adaptation will be essential to address emerging challenges and opportunities.
Many thanks to our sponsor Panxora who helped us prepare this research report.
References
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“Pakistan Virtual Assets Regulatory Authority.” Wikipedia. (en.wikipedia.org)
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