Pakistan's crypto gap

For millions of Pakistanis, cryptocurrency is no longer a novelty or a speculative gamble. It has become a coping mechanism. As inflation rises, the rupee weakens and moving money across borders grows harder, digital assets have stepped in where traditional finance often falls short.

People are not turning to crypto because it is fashionable. Freelancers use it to receive payments, families rely on it for remittances, and small savers see it as a way to preserve value. In many cases, crypto is less about chasing profit and more about maintaining financial stability.

This is what makes Pakistan's regulatory response so frustrating. Despite being among the world's top crypto-adopting countries, the legal framework has remained unclear and inconsistent. Years of hesitation have pushed activity into informal spaces, leaving users exposed and the state largely unaware of what is happening.

The Virtual Assets Ordinance 2025 was meant to change this. By creating the Pakistan Virtual Assets Regulatory Authority (PVARA), the government signaled that it was finally ready to engage with the crypto economy. On paper, that step matters. In reality, the Ordinance appears poorly drafted and unfinished, creating as many questions as it answers.

The law leaves significant regulatory gaps. Key concepts are loosely defined, responsibilities overlap with existing financial laws, and there is little clarity on how the new framework fits within the current legal system. Rather than simplifying matters, the Ordinance adds another layer of confusion.

One of its most serious flaws is how much power it concentrates in PVARA from the outset. Licensing, supervision, enforcement, investigation and penalties are all placed within a single authority. That might be defensible in a mature system, but Pakistan is not there yet. A new regulator still finding its footing should not be burdened with full enforcement powers from day one.

A more sensible approach would have been to phase these powers in gradually. Licensing and oversight could have come first, with enforcement authority added later once institutional capacity, expertise and credibility were firmly in place. Instead, the Ordinance tries to do everything at once. The result is a framework that feels cluttered, heavy-handed, and uncertain in its application.

This overreach also undermines the very purpose of regulation. Many crypto exchanges and service providers may see little reason to register at all. The Ordinance offers few incentives, no regulatory clarity, and no obvious commercial benefits. It mainly introduces obligations, restrictions and risks. When regulation only constrains and does not enable, businesses often choose to stay outside the system.

Cost barriers make this problem even worse. The financial requirements for licensed operators are set extremely high, with a minimum paid-up capital of Rs1 billion. For most local startups and fintech firms, this is simply unattainable. Domestic innovation is pushed out, competition is reduced, and the market is left to a small number of well-funded players, many of them foreign.

Ordinary users feel this uncertainty most sharply. Many people turn to crypto because they feel excluded from the banking system. Yet operating in a poorly regulated environment leaves them with no real protection. If an exchange fails or a scam occurs, there is no clear authority, no predictable process, and no safety net.

None of this means Pakistan should step away from regulating crypto. Quite the opposite. Regulation is necessary. But it needs to be coherent, carefully drafted, and aligned with how people actually use digital assets.

The Virtual Assets Ordinance 2025 requires substantial revision. Powers need to be better balanced, definitions tightened, and incentives created for businesses to come into the formal system. Most importantly, regulation must be designed to grow the market responsibly, not smother it under uncertainty.

Crypto will not wait for better drafting. Every delay, every unclear rule and every heavy-handed restriction pushes more activity into informal channels. The choice is no longer whether Pakistan should regulate crypto. It is whether it will do so thoughtfully, or continue reacting after the fact.