‘Partner, competitor, or bystander?

In 2025, Chainalysis, a blockchain analytics firm, ranked Pakistan third in the world for crypto adoption, behind India and the United States. The index measures activity rather than people, but the ranking still deserves a closer look, starting with the question of ‘why’.

Crypto is a globally traded asset that governments and central banks view with discomfort, because it is decentralised and hard to regulate. That has done little to slow its spread. In Pakistan, years of tight foreign exchange controls, a weakening rupee, high inflation and restrictions on letters of credit make a dollar-linked, easily accessible asset attractive. Remittances and freelance earnings from abroad likely add to the demand.

In economies under this kind of pressure, an asset that people buy to save or invest also becomes a way to pay and settle. Money moves to wherever it is most useful. Pakistan is not alone in this. Banks and regulators everywhere are adjusting to how quickly the forms of money are changing.

On 2 November, the Pakistan Banks Association (PBA) and the Lahore University of Management Sciences (LUMS) brought regulators, policymakers, banking practitioners and international experts together at LUMS, Lahore, for a dialogue on digital assets and the future of banking. “Digital assets” covers several different things: crypto, tokenised assets such as gold, real estate and government securities, stablecoins, and central bank digital currencies. All are a reality that must be acknowledged, and there is real progress to point to.

The Virtual Assets Act, passed in March 2026, makes the Pakistan Virtual Assets Regulatory Authority (PVARA) the statutory regulator and bars anyone from offering virtual asset services without a licence. In April, SBP’s Circular 10 allowed banks to open segregated rupee client-money accounts for PVARA-licensed providers, while barring banks from investing in, trading or holding virtual assets using their own funds or customer deposits. In August, PVARA notified licensing regulations with ten categories, including exchange, custody, advisory, and transfer and settlement. SECP’s regulatory sandbox has already licensed Fasset to offer tokenised gold. The financial sector is not out of step with the new reality.

The landscape is nonetheless complex. PVARA licenses the providers. SBP oversees banks, as well as electronic money institutions and payment providers. SECP covers non-bank finance companies and the capital markets. Where banks fit remains unsettled and will depend on the rules as well as on the business cases that emerge in Pakistan’s macroeconomic conditions.

Stablecoins sit at the centre of that question. A stablecoin is a token designed to hold a steady value, and most are tied to the US dollar. The market is about USD 320 billion, according to the Bank for International Settlements, and almost all of it is dollar-linked. Their strongest use case is cross-border payments. Pakistan received a record USD 41.6 billion in remittances in FY26, and the World Bank puts the global average cost of sending remittances at around 6 percent of the amount sent. PVARA’s chairman has calculated that each percentage point cut in that cost would save about USD 400 million a year. Banks are building too. JPMorgan issues JPM Coin, a deposit token for institutional clients that runs on a public blockchain called Base and is offered through its platform, Kinexys, which JPMorgan says averages USD 7 billion a day. Each token is a claim on a JPMorgan deposit, which makes it different from a stablecoin. Such tokens settle around the clock, work across borders, and can be programmed to release money only when a condition is met, such as delivery of goods.

The same technology carries a risk that needs plain mentioning. Many Pakistanis already hold dollars as a hedge against the rupee. A dollar stablecoin makes that easier, in small amounts, on a smartphone, at any hour. If savings shift on a large scale from rupees into dollar tokens, deposits shrink, the rupee comes under pressure, and SBP’s control over foreign exchange weakens. Much of that buying happens peer to peer on offshore platforms, where a bank sees only an ordinary rupee transfer. Regulated routes through banks and licensed providers give regulators visibility, but only if they are convenient enough that people use them. This is why banks matter: they are where rupees meet digital assets.

Tokenisation also offers a way for small savers to join the formal system. Fasset, a Dubai-based platform licensed in SECP’s sandbox, lets users buy tokens backed one-to-one by physical gold from as little as Rs 100. JazzCash and Mobilink Bank now offer treasury bills from Rs 5,000 in an app. That is digital access, not tokenisation, but it shares the same small-ticket logic. Listed REITs offer fractional property ownership in a similar way.

Central banks are experimenting too. A platform called mBridge links five central banks, those of China, Hong Kong, Thailand, the UAE, and Saudi Arabia, so that banks pay each other directly in digital central bank currencies without a chain of intermediaries. About USD 55 billion has been settled, roughly 95 percent of it in yuan. That cuts dependence on the dollar but creates dependence on the yuan, since whichever currency dominates the rails holds the power. It is the same reservation some countries have about dollar stablecoins.

Pakistan must soon find its place in this complexity, at home and abroad. Money no longer has the luxury of moving slowly, because viable alternatives have emerged. Banks have an opportunity to embed themselves in the system as a bridge, a catalyst, a custodian where permitted, or a facilitator, while protecting their shareholders and meeting foreign exchange, AML/CFT and cybersecurity requirements. The road is long, but the PBA–LUMS dialogue showed a shared willingness among regulators, banks, and academia to work through these questions together.

Copyright Business Recorder, 2026