TerraLex Cross-Border Guide to Crypto Assets

On 9 July 2025, the Government of Pakistan promulgated the Virtual Assets Ordinance, 2025 (VAO 2025), establishing an independent authority to license, supervise, and regulate virtual assets and virtual asset service providers.

VAO 2025 defines a “virtual asset” as a digital representation of value that can be traded, transferred, or used for payment or investment purposes. The definition aligns with the Financial Action Task Force (FATF) 2019 Recommendations and encompasses cryptocurrencies, stablecoins, and digital tokens used for payments or investments.

VAO 2025 excludes certain types of digital assets from its scope, including:

• digital versions of government-issued fiat currency (e.g., PKR in electronic form);
• securities and other financial instruments already regulated under existing financial laws;
• digital representations of value or rights transferable only within a closed ecosystem of the issuer; and
• non-fungible tokens (NFTs) that are not used for investment or other financial purposes.

In Pakistan, crypto assets are legally recognized as a distinct class of digital property under the Virtual Assets Ordinance, 2025. However, virtual assets, including crypto assets, are not considered legal tender and cannot be used as an official means of payment.

Yes. Crypto assets are regulated in Pakistan under the Virtual Assets Ordinance, 2025 (VAO 2025). Trading, exchange, and custody of crypto assets are permitted only through incorporated entities licensed by the Virtual Assets Regulatory Authority (VARA) and in compliance with the regulatory framework established under the Ordinance.

VAO 2025 defines various classes of virtual asset services and prescribes licensing requirements, including minimum capital thresholds and fit-and-proper criteria for controllers, directors, and key officers of licensed entities. VAO 2025 also contains provisions enabling VARA to regulate the market conduct of the licensed entities and individuals associated with them.

VAO 2025 provides that its provisions are in addition to, and not in derogation of, any other law in force in Pakistan. Thus, certain aspects of crypto assets may also be governed by other laws relating to property transfer, contracts, foreign exchange control, etc.

The legal framework regulating crypto assets is in the early stages of implementation and continues to evolve. VARA has recently invited expressions of interest for the licensing of crypto exchanges and virtual asset service providers. Once these licenses are issued and service providers become operational, further clarity on the regulatory framework is expected.

The Virtual Assets Regulatory Authority (VARA), established under the Virtual Assets Ordinance, 2025, serves as the primary regulator for virtual assets in Pakistan It is responsible for licensing, supervising, and ensuring compliance by the Virtual Asset Service Providers (VASPs), including exchanges, custodians, and brokers.

Depending on the nature of the crypto asset, other regulators may also exercise jurisdiction — for instance, the State Bank of Pakistan (SBP) oversees virtual assets used as payment instruments, while the Securities and Exchange Commission of Pakistan (SECP) regulates tokenized securities and investment products. In addition, the Financial Monitoring Unit (FMU) oversees compliance with anti–money laundering and counter–terrorism financing (AML/CFT) obligations relating to virtual asset activities and VASPs.

Yes. The Virtual Assets Ordinance, 2025 (VAO 2025) introduces specific provisions aimed at preventing money laundering and terrorist financing in connection with virtual asset activities. VAO 2025 requires the Virtual Assets Regulatory Authority (VARA) to obtain and verify information on the ultimate beneficial ownership of the licensed Virtual Asset Service Providers (VASPs) as part of the licensing process.

It further brings VASPs within the ambit of the Anti-Money Laundering Act, 2010, mandating the implementation of customer due diligence, record-keeping, transaction monitoring, and suspicious transaction reporting measures consistent with national AML/CFT standards. VARA is also empowered to conduct inspections and take enforcement action, including the suspension or revocation of licenses for non-compliance.

Additional regulations to be issued under VAO 2025 are expected to clarify the detailed technical and procedural aspects of compliance.

In Pakistan, the use of blockchain in the financial services sector may fall within the scope of “virtual asset services” under the Virtual Assets Ordinance, 2025 (VAO 2025). Accordingly, blockchain applications—such as digital asset exchanges, custody, and settlement platforms—may operate only through licensed Virtual Asset Service Providers (VASPs) under the supervision of the Virtual Assets Regulatory Authority (VARA).

Entities seeking to integrate blockchain solutions for payments, remittances, or trade finance must coordinate with both VARA and, where relevant, the State Bank of Pakistan (SBP) or the Securities and Exchange Commission of Pakistan (SECP), depending on the nature of the activity. Similarly, where virtual asset services involve Security Tokens—that is, digital assets representing, evidencing, or conferring rights or interests that constitute a security under the Securities Act, 2015—applicants are required to demonstrate compliance with the applicable provisions of that Act in addition to VARA’s licensing requirements.

As of October 2025, Pakistan does not have a dedicated tax framework governing crypto or virtual assets.

Nevertheless, profits or gains arising from the sale or exchange of virtual assets are generally expected to be treated as capital gains and may fall within the scope of the Income Tax Ordinance, 2001. Where crypto-related activities—such as trading, brokerage, or mining—constitute a regular business, such income may be taxed as business income at applicable corporate or individual rates. Depending on the nature of the transaction and the residency of the parties, withholding tax, sales tax on services, and foreign exchange reporting requirements may also apply.

The Federal Board of Revenue (FBR) has initiated consultations to develop a legal framework addressing the tax treatment of income derived from virtual assets. In parallel, the FBR is expected to introduce reporting and compliance obligations for the licensed Virtual Asset Service Providers, in coordination with the Virtual Assets Regulatory Authority, to promote tax transparency and alignment with FATF and OECD standards.

The Virtual Assets Ordinance, 2025 (VAO 2025) does not expressly classify virtual or crypto assets as a distinct type of property, and there are currently no reported Pakistani court decisions recognizing crypto assets as property.

However, VAO 2025 defines a “virtual asset” as a “digital representation of value that can be digitally traded or transferred and used for payment or investment.” In addition, the judicially accepted definition of “property” under Pakistani law is broad and encompasses intangible and non-physical assets that possess exchangeable value. On this basis, it is likely that Pakistani courts would recognize crypto assets as a form of property, consistent with VAO 2025’s language and prevailing principles of property law.

So far, there is no reported judgment on this issue. In the absence of specific law or rules addressing these issues, a local court is likely to attempt to resolve such issues, by analogy, through the application of the principles of private international law.

Thus, where the parties may have agreed to the application of laws of a particular jurisdiction to their transaction or contract, the local court will likely enforce such agreement. In the absence of such an agreement, the local court will likely be inclined to apply the laws of the jurisdiction where the contract is made. Where the contract is made in a foreign country and to be performed either wholly or in part in Pakistan and vice versa, the local court will likely apply the law of the country where the contract is to be performed. Likewise, the court likely will apply the law of the jurisdiction with which the transaction or the issue may have the closest connection.

A local court will likely assume jurisdiction if a defendant resides or works in Pakistan, or if the cause of action has wholly or partially arisen in Pakistan. If the parties have agreed to the jurisdiction of a particular court, the local court will likely enforce such agreement. The choice of forum clause providing an exclusive jurisdiction to a foreign court will generally be enforced by the local court. However, the local court may refuse to enforce such a clause by invoking the principle of forum non conveniens.

In criminal matters involving electronic crimes, a local court will assume jurisdiction in respect of an act committed outside Pakistan if such act constitutes an offence under Pakistani law and affects a person, property, information system, or data located in Pakistan.

So far, there is no reported judgment on this issue in Pakistan. However, if a smart contract satisfies all the requirements of a valid contract (i.e., free consent, lawful consideration, lawful object, etc.) under Pakistani law of contract, it will likely be treated as a legally binding contract by a local court. Local judges are not very sophisticated and tech-savvy and an adverse finding concerning the status of the smart contracts cannot be completely ruled out.

Yes. The recognition of virtual assets as a digital representation of value capable of being transferred and used for payment or investment provides the legal basis for creating security interests over crypto or other virtual assets. As with other forms of movable property, a security interest may be created over virtual assets through pledge or hypothecation.

At present, however, there are no specific regulations governing the creation, registration, or enforcement of security interests in virtual assets. Further guidance from the Virtual Assets Regulatory Authority is expected on these matters as the regulatory framework matures.

There is no inheritance tax in Pakistan.

Yes. The Virtual Assets Ordinance, 2025 (VAO 2025) is a temporary legislative measure promulgated under the government’s constitutional authority to issue ordinances. It remains in force for 120 days, unless extended or replaced by an Act of Parliament.

The Government is expected to introduce permanent legislation to establish a comprehensive and enduring framework for the regulation of virtual assets in Pakistan. This forthcoming law is anticipated to closely mirror VAO 2025, retaining its core structure on the licensing, supervision, and compliance obligations of Virtual Asset Service Providers.

In addition, the Government is likely to issue detailed rules to give effect to VAO 2025 or its successor legislation. Similarly, the Virtual Assets Regulatory Authority also expected to issue regulations clarifying the requirements for licensing, operations, and dealings in virtual assets, thereby providing practical guidance and regulatory certainty to market participants.

The Virtual Assets Ordinance, 2025 establishes a comprehensive framework empowering the Virtual Assets Regulatory Authority (VARA) to cooperate and coordinate with foreign and international regulatory authorities on matters relating to virtual assets and Virtual Asset Service Providers (VASPs).

Pursuant to this mandate, VARA may exchange information, provide mutual assistance, and enter into cooperative or reciprocal arrangements with counterpart regulators to strengthen supervision, enforcement, and compliance in cross-border virtual asset activities. Such cooperation may include the sharing of information pertaining to licensing, anti-money laundering and counter-terrorist financing (AML/CTF) obligations, market integrity, and the investigation of unlawful or unauthorized activities.

No.