Central Bank of Pakistan Allows Banks to Open Accounts for Licensed VASPs and Their Customers

The State Bank of Pakistan just reversed its long-standing prohibition on digital asset transactions, signaling a fundamental change in the country's financial infrastructure. Under BPRD Circular Letter No. 10 of 2026, the central bank now permits regulated financial institutions to provide banking services to licensed virtual asset service providers (VASPs) and their customers.

This policy follows the enactment of the Virtual Assets Act of 2026, which established the Pakistan Virtual Asset Regulatory Authority (PVARA) as the primary supervisor for the sector. The new guidelines create a legitimate path for a market that previously operated without formal oversight, directly addressing international standards for financial transparency.

Strict Operational Guardrails

The State Bank of Pakistan is avoiding an open-door policy. By enforcing these specific restrictions, the regulator aims to insulate conventional finance from the inherent volatility of the crypto market.

• Client Money Accounts (CMAs): Banks must use specific, non-remunerative Client Money Accounts to handle customer funds. These accounts must be strictly segregated from the VASP’s own operational capital to prevent co-mingling.
• Cash Restrictions: To prevent untraceable transactions, all CMAs are digital-only. Physical cash deposits and withdrawals are strictly prohibited within these accounts.
• Asset Ownership: While banks can now serve the industry, they are still expressly forbidden from holding, trading, or investing in virtual assets using their own capital or customer deposits.

Phased Integration

The framework allows for a tiered onboarding process. Entities that have secured a No-Objection Certificate from PVARA can open limited-purpose bank accounts to manage administrative costs, such as rent and salaries. However, full transactional services for virtual assets are only permitted once a VASP secures a final, valid license from the regulator.

Banks are required to perform independent verification of these licenses and must update their internal risk profiling models to account for the specific threats associated with digital assets.

Strategic Alignment

By formalizing the sector, Pakistan is satisfying FATF Recommendation 15, which requires the regulation of virtual assets to combat money laundering and terrorist financing. This move brings an estimated 40 million retail traders into a supervised environment, allowing the state to monitor capital flows while exploring broader digital initiatives, including potential bond tokenization and sovereign mining projects.