EDITORIAL: The Government of Pakistan, instead of tabling a Bill in Parliament, asked the President to promulgate Virtual Assets Ordinance 2025 — published in gazette on July 9, 2025 — to make it effective immediately, facilitating the establishment of Pakistan Virtual Asset Regulatory Authority (PVARA).
PVARA is “responsible for regulating, licensing, and supervising Virtual Asset Service Providers (VASPs) in Pakistan”. Its mandate is ensuring “virtual asset activities operate within a safe, secure, and transparent environment that aligns with both international standards and Pakistan’s national interests”. Even after lapse of more than four months, PVARA’s website (https://www.pvara.gov.pk/) is not fully functional.
The above legislative and administrative moves signaled a clear intent to join the global digital finance arena. The recent visit of Federal Finance and Revenue Minister, Muhammad Aurangzeb, to PVARA was aimed at building on this progress. The Finance Minister appreciated work done by the PVARA team and commended their commitment.
Muhammad Aurangzeb emphasized the need for timely implementation for safeguarding Pakistan’s economic interests. This top leadership endorsement is a critical step for any new regulatory body. The Minister’s words highlight the national importance of this project. However, this official admiration now clashes with prevailing reality.
The grand vision of the Virtual Assets Ordinance 2025 [hereinafter “VAO 2025”] is being stifled by an alarming lack of execution. The most visible and depressing symbol of this failure is PVARA’s own dysfunctional website.
The authority’s primary portal to the world remains incomplete. The foundational legislation itself is not accessible on its own platform. This basic technological failure reveals a profound operational inertia. How can Pakistan hope to lead in the digital asset space with such a fundamental flaw? This inertia has dire and already quantifiable consequences for the national economy.
A recent investigative report by a local English newspaper uncovered a staggering financial hemorrhage. The country has lost an estimated USD600 million to illegal crypto transactions. This massive capital flight exploits a clear regulatory vacuum. The mechanism is both simple and devastating to financial stability.
The citizens purchase dollars from formal exchange companies and deposit them into their foreign currency (FCY) accounts. They then withdraw the cash to invest in cryptocurrencies through entirely unlawful channels. This illicit pipeline directly sabotages the efforts of the State Bank of Pakistan (SBP) to consolidate foreign exchange reserves. The Exchange Companies Association of Pakistan (ECAP) has confirmed this alarming trend. Their dollar sales to banks dropped by 23 percent in four months.
The USD600 million exodus represents more than just a statistical loss. It is a loud and clear warning sign. Absence of a regulated, onshore crypto ecosystem is actively harming Pakistan’s economic security.
The VAO 2025 itself is a surprisingly ambitious document. The law establishes a comprehensive framework for the digital asset sector. The legislation creates PVARA as a powerful and autonomous regulatory body. The framework mandates strict licensing for all Virtual Asset Service Providers (VASPs).
The VAO 2025 demands comprehensive consumer protection measures like mandatory asset segregation. The law imposes a fiduciary duty on platforms to act in their clients’ best interests. It requires annual proof of reserve audits to prevent fractional reserve practices. These provisions are designed to build a foundation of trust.
The VAO 2025 yet not debated in National Assembly or Senate and extended for another term of 120, also incorporates strong Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) protocols. It legally designates VASPs as obligated entities under the Anti-Money Laundering Act, 2010. It mandates compliance with international standards like the Financial Action Task Force (FATF) Travel Rule. This requires collecting and transmitting beneficiary information for transactions.
The VAO 2025 grants regulators real-time access to transactional data for monitoring. These are precisely the tools needed to combat the illicit flows identified in a recent newsreport.
The Pakistani framework appears strong on paper when compared to global leaders. The European Union’s Markets in Crypto-Assets (MiCA) regulation is a global benchmark. MiCA similarly emphasizes strict reserve backing for stable coins and comprehensive licensing. The United Kingdom’s Financial Conduct Authority enforces rigorous AML checks and consumer duty. Japan’s regulatory regime, shaped by past exchange failures, mandates cold storage for customer assets.
In theory, the VAO 2025 incorporates many of the best global practices. Its potential strength lies in a comprehensive design. The law seeks to avoid pitfalls of lighter-touch regulatory models. Such models have allowed for significant consumer harm and market manipulation elsewhere. The Ordinance’s intent to manage risk is therefore commendable. However, a law trapped in a legislative PDF is utterly useless against a USD600 million problem.
The critical weaknesses of the VAO 2025 are magnified by delay. The extremely high capital requirements present a significant market barrier. A one-billion-rupee minimum paidup capital for exchanges is prohibitive. This high threshold will likely prevent talented Pakistani entrepreneurs from entering the market. It risks creating an oligopoly of only deeppocketed, possibly foreign, entities. The significant compliance burden provided under the VAO 2025 could further deter serious applicants. The need for fit and proper tests and real time sharing is complex. This heavy load might push existing informal operators further underground. The regulator’s extraordinarily broad powers also raise concerns.
The PVARA can act as licensor, investigator, and judge its own administrative cases—concentration of power demands exceptional transparency and accountability. The current opacity, evidenced by the broken website, does not inspire confidence in such oversight.
The solution demands a radical shift from planning to action. The Finance Minister’s offer to resolve bottlenecks must be activated immediately. PVARA must also achieve full operational status within a matter of weeks. The authority’s website must be launched with all key documents publicly accessible.
Drafting secondary regulations must be prioritized and opened for public consultation. A clear and public timeline for the entire licensing process is non-negotiable. The SBP, Federal Investigation Agency (FIA), and Federal Board of Revenue (FBR) must initiate a coordinated task force. A massive public awareness campaign is equally urgent. This campaign should warn citizens of the risks of using unlicensed platforms. It must simultaneously announce the imminent arrival of a safe, domestic ecosystem.
The world is indeed watching Pakistan’s ambitious regulatory foray. Pakistan has recently secured a seat in global rule-making on cryptocurrencies and blockchain governance after the chairman of the PVARA joined the World Economic Forum’s Steering Committee on Digital Asset Regulations. This international recognition must be matched by flawless domestic execution.
The comprehensive framework is a commendable first draft for the nation’s digital financial future. However, a strong political will is imperative at the highest levels of finance for effective enforcement. The USD600 million bleeding from the economy cannot be stanched by plans and promises.
The time for briefings and phased approaches is over, giving way to an era of urgent, decisive, and transparent implementation. The Federal Finance Minister’s admiration must now transform into relentless, result driven pressure. Pakistan’s credibility regarding digital ambition now rests on this simple, critical next step.
Copyright Business Recorder, 2025
The writer is a lawyer and author, is an Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Senior Visiting Fellow of Pakistan Institute of Development Economics (PIDE)
The writer, an Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds LLD in tax laws
The writer is a corporate lawyer based in the US with extensive expertise in financial regulations, including Virtual Asset Service Providers (VASPs), corporate governance, and global economic policies. He holds an LLM from Washington University in St. Louis and has completed the Management Development Program at the Wharton School. He has developed regulatory frameworks for North American and South American Financial Institutions and has consulted and trained bureaucrats of different regions. He can be reached at abdulrauff@hotmail.com