RESEARCH: Pakistan cryptocurrency and digital asset status regulatory requirements

# RESEARCH: Pakistan Cryptocurrency and Digital Asset Regulatory Requirements

Executive Summary

Crypto assets in Pakistan are not explicitly legalized nor prohibited, existing under a regulatory gray area. The Securities and Exchange Commission of Pakistan (SECP) oversees crypto-related activities through its general licensing framework, but no specific law or regulation directly governs virtual currencies. As of 2025–2026, the SECP has issued advisories urging caution, while the Federal Board of Revenue (FBR) treats gains from crypto trading as capital gains for tax purposes. No entities have been formally licensed to operate as cryptocurrency exchanges or wallets under a dedicated license, though some fintech firms operate under broader financial services licenses that incidentally cover crypto activities.

Practical Reality

• Legal Status: Ambiguous; not recognized as legal tender.
• Regulator: SECP (with oversight from FBR for taxation).
• Licensing: No specialized crypto license; activities fall under existing financial service licensing regimes.
• Compliance: Entities must comply with general AML/KYC, tax reporting, and data protection rules.

Regulatory Framework

Regulatory Bodies

Primary Laws

• SECP Regulations: Govern issuance, trading, and related activities under existing securities and money transmission frameworks. No specific crypto ordinance; relies on the Securities (Issue and Trading of Shares and Other Securities) Rules, 2018.
• FBR Income Tax Ordinance, 2001: Section 115BBB treats capital gains from crypto trading as taxable income.

International Standing

• Pakistan is a member of FATF (Financial Action Task Force), adhering to its AML/CFT standards for virtual asset service providers (VASPs).

Licensing Requirements

Entities Requiring License

• Virtual Asset Service Providers (VASPs), including exchanges and wallet services, fall under the SECP’s “Money Transmission” or “Securities Exchange” licensing categories.

Capital Requirements

• No specific monetary thresholds are stipulated for crypto‑related licenses; general capital adequacy norms of the issuing license apply.

Application Process & Timeline

1. Submit application to SECP with required documentation (business plan, KYC/AML policy, audited financial statements).
2. SECP review typically takes 60–90 days post submission.
3. Approval results in a money transmission or securities exchange license, valid for up to two years.

Actual Licensing Activity

• As of 2025: No entities have been officially licensed solely as crypto exchanges; existing fintech firms operate under broader licenses that indirectly permit crypto services.

AML/KYC Requirements

• VASPs must implement Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) for high‑risk customers.
• Reporting of suspicious transactions via STRs to SECP within 24 hours.
• Maintain records of beneficial ownership, transaction monitoring, and periodic reporting.

Enforcement Actions

• Penalties: Non‑compliance with AML/KYC or tax obligations can lead to fines up to PKR 10 million (approx. USD 60,000) and/or imprisonment under the Prevention of Money Laundering Act, 2002.
• Cases: No major enforcement actions against crypto entities in recent years; advisories issued by SECP serve as primary deterrents.

Tax Treatment

• Gains from buying and selling cryptocurrencies are treated as capital gains under Section 115BBB of the Income Tax Ordinance, 2001.
• Tax rate for capital gains is 15% on long‑term (held > 2 years) and 5% on short‑term (held ≤ 2 years).
• Taxable income includes proceeds from staking, mining rewards, and airdrops.

Key Gaps & Risks

• Regulatory Uncertainty: Lack of dedicated crypto legislation leaves room for inconsistent interpretations.
• AML/KYC Enforcement: Weak enforcement mechanisms may allow illicit activities to persist.
• Tax Guidance: Ambiguity around taxation of specific crypto services (e.g., staking, NFTs) could lead to compliance challenges.
• Market Confidence: Absence of a clear regulatory framework hinders institutional participation.

Sources

• SECP Overview
• FBR Income Tax Ordinance, 2001 – Section 115BBB
• Pakistan Regulatory Status: Limited WHO-GMP and No... | LinkedIn
• Pakistan Retains G5 Telecom Regulator Status With Higher ITU...
• visa.nadra.gov.pk/verify