The State Bank of Pakistan has permitted commercial banks to open accounts for licensed digital currency businesses, officially overturning an eight-year ban that had isolated the sector from the formal financial system.

The central bank issued a circular to regulated entities detailing the new compliance requirements, according to Reuters.

This policy update follows the recent enactment of the Virtual Assets Act 2026.

The framework will open new cross-border payment corridors and facilitate closer collaboration between Pakistan and established digital asset hubs such as the UAE.

Banks must verify licenses issued by the newly formed Pakistan Virtual Asset Regulatory Authority before onboarding any firm.

Lenders are required to open separate, non-interest-bearing client money accounts denominated in Pakistani rupees to settle authorised transactions.

“This is a foundational step in bringing virtual assets into the formal financial system of Pakistan,”

said Bilal bin Saqib, Chairman of the Pakistan Virtual Asset Regulatory Authority.

The central bank strictly prohibits lenders from trading or holding digital currencies using their own capital or customer funds.

The regulations also block cash deposits and withdrawals from client money accounts to prevent the commingling of corporate and user funds.

Financial institutions must conduct deep customer due diligence on digital asset companies before establishing a relationship.

This includes understanding the company’s business model, customer base, and the geographic markets it serves.

Banks must amend their customer risk profiling models to account for the unique risks associated with digital currencies.

The central bank mandates continuous monitoring and the immediate reporting of suspicious transactions to the Financial Monitoring Unit.

Integrating digital assets into the formal banking system could accelerate Pakistan’s financial connections with the Middle East.

The country previously signed agreements with Binance to explore asset tokenisation and has granted initial clearances to international exchanges.

Pakistani officials previously outlined their vision for blockchain technology as critical infrastructure at the Bitcoin MENA conference.

This regulatory clarity is likely to attract regional investors looking to participate in the country’s emerging digital economy.

The bank noted that companies holding initial no-objection certificates may only open limited-purpose accounts.

Lenders will extend full transactional services only after a provider receives its final operating license.

Featured image credit: Edited by Fintech News UAE, based on image by freepik