For nearly a decade, Pakistan’s legal position on cryptocurrencies and digital assets was marked by ambiguity. Traders, investors, and exchanges operated in a legal vacuum. The Virtual Assets Act 2025 (the “Act”) is the country’s first comprehensive effort to bring this sector into a formal regulatory framework. From a legal perspective, the Act represents an important shift. But at the same time, it also raises significant questions about proportionality, innovation, and regulatory clarity.
At the heart of the legislation is the establishment of the Pakistan Virtual Asset Regulatory Authority (PVARA). Under Section 6 of the Act, the federal government is authorised to establish an autonomous regulatory authority tasked with the licensing, supervision, and regulation of “virtual asset service providers” (VASPs) and virtual asset activities in Pakistan. The statute directs the Authority to “protect customers and investors of Pakistan’s Virtual Asset markets by establishing and enforcing appropriate safeguards and conduct of business requirements.”[1]
The detailed composition of this authority further underscores the legal significance of the regime. The Act provides that the board will include representatives from the Ministries of Law and Finance, the Governor of the State Bank of Pakistan, the Chairperson of the Securities and Exchange Commission of Pakistan, and senior officials from anti‑money laundering agencies, with additional non‑ex officio experts appointed as necessary.[2]
On its face, this multi‑stakeholder structure is intended to balance technical expertise with regulatory surveillance. At the same time, the Act confers on the Authority a considerable discretionary power to issue directives, make rules, and impose administrative conditions with limited statutory constraints. Such broad delegations, without clear standards, could undermine the basic principles of administrative law that say that laws should be clear and not arbitrary.
A central innovation of the Act is its mandatory licensing regime for VASPs. The legislation criminalises the provision of virtual asset services without a licence, with penalties of imprisonment for up to five years or a fine of up to PKR fifty (50) million, or both.[3] In addition, conducting an initial virtual asset offering (IVAO) or similar crypto service without regulatory authorisation may attract a term of imprisonment of up to three years and a fine of PKR 25 million.[4] These provisions signify a shift towards criminal sanctions even for conduct that, in many jurisdictions, is treated initially as an administrative rather than a criminal offence.
From a legal standpoint, the use criminal penalties in a regulatory act raises concerns about proportionality. According to Pakistani constitutional law, punitive repercussions, including imprisonment, must be carefully calibrated to ensure that only actions that plainly amount to gross misconduct are criminalised. When offences are defined too broadly, they can lead to ambigous or technical defaults. This exposing individuals and entities to severe consequences for even accidental regulatory errors.
To adjudicate disputes arising under the Act, the legislation establishes a Virtual Assets Appellate Tribunal with exclusive jurisdiction over regulatory appeals.[5] The Act explicitly states that “no court shall take cognisance of a legal dispute under this Act or the rules or regulations made thereunder to which the jurisdiction of the Virtual Assets Appellate Tribunal extends.”[6] By excluding ordinary courts from review, the Act raises serious questions about access to justice and the separation of powers, especially in light of constitutional guarantees such as the right to fair trial under Article 10‑Aof the Constitution of Pakistan 1973.[7] Although specialised tribunals are not inherently problematic, the ouster of High Court jurisdiction may be constitutionally dubious. Pakistani jurisprudence has constantly emphasised that judicial review is a fundamental aspect of the constitutional structure; any attempts to curtail it must be construed narrowly.[8] But the Act’s phrasing is broad enough to allow for a challenge in court.
Another important provision of the Act requires licensed entities to comply with data protection, cybersecurity, and governance obligations as determined by the Authority.[9] Although this reflects international regulatory practice, the Act’s text does not elaborate on how these obligations will interact with Pakistan’s evolving data protection legal framework and constitutional privacy protections. The absence of cross‑referencing to existing statutory instruments or judicially enforceable standards may lead to uncertainty in enforcement and compliance efforts. The fact that the Authority is in charge of setting standards raises concerns about regulatory fragmentation, where overlapping or inconsistent requirements could emerge across different sectors.
At the level of definitions, the Act adopts an inclusive definition of “virtual assets” that captures cryptocurrencies, stablecoins, digital tokens, and similar instruments that can be electronically traded or transferred.[10] Importantly, the definition excludes fiat currency and traditional financial instruments that already fall under the jurisdiction of existing financial sector laws.[11] This definitional clarity is legally important: it confirms that virtual assets are not recognised as legal tender in Pakistan, even if they are regulated for trading and investment purposes. The Act does not, however, go any further to clarify the status of these assets under private law. Without being recognised as property or having a clear legal category, questions about ownership, transfer, security interests, and insolvency stay unanswered, leaving the courts to fill in the gaps.
A recurring theme in the Act is its emphasis on alignment with international anti‑money laundering and counter‑terrorist financing standards, particularly those of the Financial Action Task Force (FATF). The licensing, record‑keeping, and customer identification requirements reflect FATF’s risk‑based approach to virtual asset regulation.[12] While compliance with international norms is critical to maintaining Pakistan’s financial credibility, a regulatory regime that prioritises compliance over innovation risks discouraging local entrepreneurship and participation in emerging global markets for decentralised finance.
A useful point of comparison is the European Union’s approach under Markets in Crypto-Assets Regulation (MiCA),[13] which adopts a more structured and rights-based regulatory model. Unlike the Pakistani Act, MiCA provides detailed categorisation of crypto-assets (such as asset-referenced tokens and e-money tokens), alongside clearly defined authorisation procedures and investor protection mechanisms. Importantly, it embeds proportionality into its regulatory design by distinguishing between different types of market participants and tailoring obligations accordingly. This reduces the risk of overregulation and provides greater legal certainty for both regulators and market actors. By contrast, Pakistan’s framework adopts a more uniform and enforcement-heavy approach, without sufficiently differentiating between categories of actors or activities, thereby increasing the likelihood of regulatory overreach.
Similarly, the United Kingdom’s evolving regulatory stance, administered by the Financial Conduct Authority, illustrates a more incremental and consultative approach.[14] Rather than imposing immediate blanket criminalisation, the UK has focused on phased regulation, beginning with anti-money laundering registration requirements and gradually expanding into consumer protection and financial promotion rules. This approach reflects a recognition that regulatory clarity must develop alongside market maturity. It also ensures that enforcement mechanisms remain proportionate and adaptable. In contrast, Pakistan’s Act adopts a more rigid ex ante framework, imposing strict licensing and criminal sanctions at the outset, which may hinder experimentation and early-stage innovation in the digital asset sector.
Critically, while the Act addresses the regulation of intermediaries and service providers, it remains largely silent on deeper doctrinal questions about the legal nature of virtual assets themselves. It does not provide guidance on whether virtual assets constitute intangible property under Pakistani law, nor does it address their treatment in insolvency, taxation, or secured transactions. Moreover, the Act does not clarify whether smart contracts – self‑executing protocols used in many blockchain applications – are to be recognised as legally enforceable contracts under general contract law principles. These doctrinal gaps may lead to legal disputes that the regulatory framework is ill‑equipped to resolve. The Act essentially controls the market’s infrastructure without fully addressing the legal aspects of the transactions that take place there.
In conclusion, the Virtual Assets Act 2025 marks a pivotal moment in Pakistan’s legal evolution on digital finance. Its provisions on the establishment of a specialised regulator, mandatory licensing, and criminal penalties represent a decisive break from the prior legal vacuum. From a regulatory standpoint, the Act brings much needed structure. However, from a legal perspective, it raises substantial questions about proportionality, judicial oversight, and doctrinal clarity. More broadly, it shows an unresolved conflict between control and innovation, between compliance and growth, and between centralised regulation and decentralised technology.
Whether the Act ultimately enables innovation rather than merely constraining it will depend on how these provisions are interpreted, applied, and supplemented by future rules and judicial interpretations. If the regulatory authority exercises its powers with transparency, proportionate enforcement, and a commitment to legal certainty, the framework could balance risk control with technological progress. If not, it simply risks replacing one form of legal uncertainty with another.
[1] Virtual Assets Act 2025, s 9
[2] Virtual Assets Act 2025, s 7
[3] Virtual Assets Act 2025, s 54(1)
[4] Ibid s 54(2)
[5] Virtual Assets Act 2025, s 62
[6] Ibid
[7] Constitution of Pakistan 1973, art 10‑A
[8] MR A. MUJEEB PlRZADA v. FEDERATION OF ISLAMIC REPUBLIC OF PAKISTAN, PLJ 1990 Karachi 14 (FB); Hafiz Muhammad Azeem and Muhammad Shahid Sultan, Piercing the Veil of Ouster Clauses: Exploring Judicial Review’s Reach and Impact (Current Trends in Law and Society) <https://doi.org/10.52131/ctls.2023.0301.0013 accessed 4 March 2026>; Constitution of Pakistan 1973, arts 184, 199, 227
[9] Virtual Assets Act 2025, s 9
[10] Virtual Assets Act 2025, s 3
[11] Ibid
[12] Financial Action Task Force, Guidance for a Risk‑Based Approach to Virtual Assets and Virtual Asset Service Providers (FATF, 2021) Recommendation 15
[13] Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on Markets in Crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 [2023] OJ L150/40
[14] Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, SI 2017/692 (as amended); Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2019, SI 2019/632; Financial Conduct Authority, Guidance on Cryptoasset Businesses (updated 2023).
