Borderless, open-sourced, volatile and decentralised — crypto is fast-paced and constantly evolving. These aren’t just buzzwords; they define a technology that challenges the very foundations of traditional financial systems.
The question that looms large is: how do you regulate something designed to resist control and defy regulation while growing faster than our ability to legislate around it?
For years, Pakistan warily watched as the global crypto revolution surged ahead — sceptical and silent. In 2018, the State Bank of Pakistan (SBP) issued a circular, prohibiting banks from facilitating crypto transactions. But a ban is not regulation and silence is not strategy. And Pakistanis were quick to sense the stirrings of something bigger. Was this mind-boggling asset class a commodity, a security, a currency – or something else entirely?
With no legal clarity or roadmap, Pakistan’s cryptocurrency market grew quietly in the shadows — unregulated, misunderstood and vulnerable to misuse. Yet despite the legal vacuum and risks, by 2021, the country had surged to third place globally in crypto adoption, with an estimated 15 to 20 million active users.
The government has recently taken significant steps to formalise the crypto sector with the establishment of the Pakistan Crypto Council (PCC). Led by Bilal Bin Saqib and supported by key figures such as the finance minister and the SBP governor, the PCC aims to responsibly integrate digital assets into the national financial system. The appointment of Binance founder Changpeng Zhao as a strategic adviser further signals Pakistan’s intent to align with global crypto standards. Still, challenges remain. Financial literacy is uneven, and institutional capacity stretched. Regulators now face the dual task of building a global-standard framework while keeping pace with a rapidly evolving industry.
The regulation of crypto occupies a uniquely complex space, sitting at the crossroads of multiple, often overlapping, regulatory regimes. As blockchain-based applications rapidly evolve and new cryptocurrency use cases emerge almost daily, each innovation introduces fresh legal uncertainties and risks.
For Pakistan, the challenge is even more pronounced. It must strike a careful balance between establishing legal certainty and navigating its own economic priorities and institutional capacities. Yet the urgency to bring this emerging sector under the umbrella of a comprehensive regulatory framework is undeniable. Pakistan must foster responsible innovation while protecting consumers in a borderless digital economy — or risk falling behind in the global race.
The following policy recommendations outline a phased and pragmatic path forward.
Phase 1 would be to lay the foundation. This would include: one, establishing a Central Oversight Authority. Set up a dedicated crypto regulatory body with a clear mandate for licensing, compliance, coordination and ongoing policy development.
Two, aligning AML/CFT (Anti—Money Laundering/Countering Financing of Terorism) standards with Financial Action Task Force (FATF) guidelines. Develop a crypto-specific anti-money laundering and counter-terrorism financing framework with robust KYC norms, transaction monitoring, and enforcement.
Three, clarifying legal definitions and regulatory guidelines. Define crypto assets, service providers, and blockchain applications to eliminate ambiguity. Set rules for capital requirements, risk management, and investor protection.
And, four, licensing Virtual Asset Service Providers (VASPs). Require registration and licensing of exchanges, wallets, and custodians to ensure consumer protection and regulatory compliance.
Phase 2 would involve controlled innovation by one, adopting a dual-tier licensing model. Inspired by models in Singapore and Japan, a dual-tier system can regulate small innovators lightly while requiring stricter compliance from large players, ensuring flexibility and systemic safety.
Two, expanding regulatory sandboxes and pilot programmes. Controlled testing environments allow the government to observe, learn from, and adapt to crypto innovations without exposing the broader financial system to shocks. SECP’s sandbox should be expanded and focused on blockchain, digital payments and tokenised assets.
Three, creating a legal framework for blockchain use. Beyond cryptocurrencies, blockchain can streamline governance, logistics and recordkeeping. A national blockchain strategy, with accompanying legal clarity, can improve public sector efficiency and trust.
Phase 3 would be about protection, resolution and value creation. This would involve consumer protection standards to enforce transparency, secure custody protocols, and disclosures to safeguard users and build market trust. Data protection laws would require encryption and secure personal and financial data handling practices across all crypto platforms to prevent misuse and ensure privacy. Fast-track arbitration and mediation frameworks for crypto and blockchain-related conflicts would also be needed.
The last phase — Phase 4 — would be about strategic integration. This would be about first, regulating and incentivising Bitcoin mining. With surplus electricity in certain regions and rising global demand, Pakistan can explore environmentally responsible, licensed Bitcoin mining — offering tax incentives and clean energy solutions to attract legitimate investment.
Second, developing a cryptocurrency taxation policy. Introduce clear capital gains and income tax structures on digital assets to support fiscal transparency, while simultaneously raising revenue.
Third, promoting innovation and international cooperation. Offer incentives for blockchain startups and collaborate with international partners for cross-border enforcement and knowledge sharing.
The world of digital assets is rapidly reshaping global economies, and Pakistan faces a critical moment. With technology redefining finance, the country must act swiftly to create a robust regulatory framework that safeguards consumers, combats illicit activity and establishes its position in the global digital economy.
The borderless nature of crypto offers limitless opportunities, but without urgent action, Pakistan risks being left behind.
The writer is an Islamabad—based lawyer and partner at HKN, Legal Practitioners and Advisers. She is a graduate of King’s College London and can be reached at: mariam12saleemgmail.com
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