Pakistan’s regulators have taken a decisive step that few emerging economies have dared. Recently, the country has invited global crypto exchanges and service providers to apply for operating licenses.
In hindsight, it might seem like the Pakistan Virtual Assets Regulatory Authority (PVARA) is trying to create demand and expand the digital assets market in the country. But it’s actually trying to bring an existing market of tens of millions of users and billions of dollars in annual transactions into a legal and supervised framework.
This is a critical move because crypto adoption has been soaring to record highs in Pakistan. The country now sits third on Chainalysis’ 2025 Global Crypto Adoption Index, trailing only India and the United States. According to industry estimates, more than 40 million Pakistanis are already active in crypto markets, a scale that rivals participation in traditional finance.
So, formalizing this massive and increasing digital activity without losing dynamism is necessary, but extremely challenging.
Why crypto is impossible to ignore in Pakistan
Several structural factors explain why crypto is a national conversation. First is demographics. Pakistan has one of the youngest populations globally, with more than 60% under the age of 30. Smartphone penetration is rising quickly, and digital platforms have become the primary entry point for financial services.
Second, remittances are the backbone of the economy. Overseas workers send home over $30 billion each year, but traditional transfer channels remain expensive and slow. Crypto offers near-instant settlement and lower fees. So, it’s a natural alternative.
Also, inflation and currency weakness have shifted public perception of digital assets. MEXC’s 2025 survey shows that 46% of global users now see crypto as an inflation hedge, up from 29% earlier this year.
In South Asia, the link is even stronger. Spot trading in the region surged to 52%, with 53% of users citing financial independence as their primary motivation. These figures illustrate why Pakistani users see crypto less as speculation and more as a practical financial tool.
Regulation as survival, not enthusiasm
Pakistan’s licensing regime must be understood through its recent history. Until 2022, the country was on the Financial Action Task Force (FATF) gray list, which restricted access to global banking channels. To exit, regulators built one of the toughest anti–money laundering and counterterrorist financing systems in the region.
That experience shapes today’s crypto policy. PVARA requires global firms seeking licenses to already hold approval from major regulators such as the SEC, FCA, MAS, or the UAE’s VARA. While some might see this as protectionism, it’s actually proactive risk management. Pakistan cannot afford regulatory lapses that could threaten its international financial standing. The goal is to import proven compliance practices while supervising a market that has so far grown outside of formal oversight.
A market already experimenting with tokenization
While many jurisdictions treat real-world asset tokenization as a future possibility, Pakistan is already testing it. Fasset’s gold tokenization platform went live this year, allowing retail users to buy fractional, gold-backed tokens for less than a dollar. The Securities and Exchange Commission has approved multiple projects through its sandbox, including tokenized real estate.
This signals that regulators are willing to let innovation proceed under controlled conditions. Adoption will likely extend beyond trading into use cases tied to everyday savings and investments. Tokenized sukuk, already under development, could position Pakistan as a player in the $3 trillion Islamic finance market. It would give Muslim investors globally access to compliant digital assets.
Risks that cannot be ignored
Pakistan’s crypto market has thrived for years without licenses or oversight. Informal platforms and peer-to-peer networks already serve millions at low cost and high speed. If licensed firms cannot match that experience, users will stay with what they know.
Enforcement is another challenge. Supervising 40 million users, onboarding international exchanges, and maintaining FATF-grade compliance is a scale few regulators globally have managed. Requiring international licenses raises standards but could also exclude smaller, innovative platforms that often drive new ideas. Pakistan risks creating a market dominated by a few large global players, leaving little room for local entrepreneurs.
What Pakistan should prioritize
First, balance compliance with usability. Regulatory credibility is essential, but platforms must compete with informal networks on speed, cost, and convenience. Sandboxes are a smart start, but they need to scale into real market options.
A crucial and almost non-negotiable strategy would be to integrate crypto with remittance channels. With $30 billion flowing in annually, remittances should be the proving ground for licensed crypto platforms. If exchanges can demonstrate faster, cheaper, and compliant transfers, adoption will accelerate organically.
Regulators should also look into advancing Shariah-compliant digital assets. Tokenized sukuk and compliant stablecoins could open Pakistan’s market to global Islamic investors. This requires coordination between financial regulators, scholars, and technical teams to design products that satisfy both compliance and faith-based requirements.
Notably, regulators need real-time visibility. Setting up regulator-operated nodes or standardized reporting feeds would shrink the gap between market activity and oversight. Without this, enforcement risks becoming reactive rather than preventive.
Finally, scale local capacity. Licensing global players is valuable, but Pakistan also needs domestic builders. A regulatory framework that supports local startups while still meeting compliance standards will prevent the market from being dominated by offshore firms.
The outlook
Pakistan is attempting the hardest version of crypto regulation, which is formalizing mass adoption after the fact. Success will depend on whether licensed platforms can win users away from informal networks, whether regulators can maintain international credibility, and whether innovation is allowed to take root alongside compliance.
If Pakistan succeeds, it could provide a model for other emerging markets with large, informal crypto economies. But a failure may reinforce the view that developing countries cannot manage sophisticated financial technologies.
Either way, Pakistan’s experiment is one of the most important live tests of crypto regulation today. The next 12 to 18 months will determine whether the country can build a regulated ecosystem that serves both its citizens and the global financial system.
