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The Pakistan Virtual Assets Act 2025 and the Balance Between Regulation and Innovation: A Critical Legal Analysis

The Pakistan Virtual Assets Act 2025 and the Balance Between Regulation and Innovation: A Critical Legal Analysis

For nearly a decade, Pakistan’s legal position on cryptocurrencies and digital assets was marked by ambiguity. Traders, investors, and exchanges operated in a legal vacuum. The Virtual Assets Act 2025 (the “Act”) is the country’s first comprehensive effort to bring this sector into a formal regulatory framework. From a legal perspective, the Act represents an important shift. But at the same time, it also raises significant questions about proportionality, innovation, and regulatory clarity.

At the heart of the legislation is the establishment of the Pakistan Virtual Asset Regulatory Authority (PVARA). Under Section 6 of the Act, the federal government is authorised to establish an autonomous regulatory authority tasked with the licensing, supervision, and regulation of “virtual asset service providers” (VASPs) and virtual asset activities in Pakistan. The statute directs the Authority to “protect customers and investors of Pakistan’s Virtual Asset markets by establishing and enforcing appropriate safeguards and conduct of business requirements.”[1]

The detailed composition of this authority further underscores the legal significance of the regime. The Act provides that the board will include representatives from the Ministries of Law and Finance, the Governor of the State Bank of Pakistan, the Chairperson of the Securities and Exchange Commission of Pakistan, and senior officials from anti‑money laundering agencies, with additional non‑ex officio experts appointed as necessary.[2]

On its face, this multi‑stakeholder structure is intended to balance technical expertise with regulatory surveillance. At the same time, the Act confers on the Authority a considerable discretionary power to issue directives, make rules, and impose administrative conditions with limited statutory constraints. Such broad delegations, without clear standards, could undermine the basic principles of administrative law that say that laws should be clear and not arbitrary.

A central innovation of the Act is its mandatory licensing regime for VASPs. The legislation criminalises the provision of virtual asset services without a licence, with penalties of imprisonment for up to five years or a fine of up to PKR fifty (50) million, or both.[3] In addition, conducting an initial virtual asset offering (IVAO) or similar crypto service without regulatory authorisation may attract a term of imprisonment of up to three years and a fine of PKR 25 million.[4] These provisions signify a shift towards criminal sanctions even for conduct that, in many jurisdictions, is treated initially as an........

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