Pakistan has taken a significant step toward integrating digital finance into its economy by introducing its first comprehensive policy framework to regulate virtual assets and virtual asset service providers (VASPs). The announcement, made on Thursday by FIA, marks a crucial milestone in the country’s efforts to align with global standards, particularly those set by FATF. This initiative is a major leap forward as the country seeks to address the challenges posed by cryptocurrencies and blockchain technology while ensuring national security and financial stability.
The policy framework, developed by a dedicated government body under the AML and Counter Terrorism Financing (CTF) authority, is designed to regulate cryptocurrencies and the platforms that handle them. This includes exchanges, wallets, and other service providers that facilitate digital transactions. With the growing popularity of cryptocurrencies and blockchain-based finance, the government recognized the need for a regulatory structure that ensures transparency and accountability within the industry.
FIA Director Sumera Azam described the new policy as a “paradigm shift” in how Pakistan views digital finance, highlighting the importance of balancing technological advancement with national security imperatives. The policy aims to set clear and enforceable rules for the emerging digital finance sector, promoting a safer and more compliant ecosystem. As Azam pointed out, the framework is not merely about enforcement but also about fostering innovation in the blockchain space while mitigating the risks of financial crime and terrorist financing.
The policy is designed with the objectives of improving compliance, reducing risks associated with financial crimes, and creating an environment that encourages innovation within the digital finance sector. It also aims to align with FATF’s Recommendation 15, which emphasizes the need for countries to update their AML and CTF laws to accommodate the rise of new technologies, including virtual assets. By adhering to this recommendation, Pakistan hopes to build a regulatory framework that both supports the growth of digital finance and ensures that these technologies are not misused for illegal activities.
In addition to the regulatory framework, the policy also ties into the recent establishment of the Pakistan Crypto Council, an initiative aimed at laying the groundwork for legal cryptocurrency trading in the country. The council’s formation is part of Pakistan’s broader strategy to integrate the country into the global digital economy by attracting international investors and positioning the nation as a key player in the world of digital finance. By creating a legal and regulatory framework for virtual assets, the government hopes to encourage both local and foreign investments, stimulating growth in the digital sector.
The policy is currently undergoing a stakeholder review process, and once approved, it will be implemented in phases starting next year. This phased implementation will allow for adjustments based on feedback and the evolving needs of the digital economy. During the review process, various stakeholders, including industry experts, digital finance platforms, and legal authorities, will have the opportunity to provide input, ensuring that the final policy is well-rounded and effective in meeting its objectives.
The introduction of this policy is also seen as a step toward building institutional capacity in Pakistan to manage and regulate the digital finance sector effectively. The FIA has emphasized that this initiative is not solely about enforcement but also about creating an environment that supports responsible innovation within the industry. By establishing clear rules and regulations, Pakistan aims to promote the responsible use of digital assets while protecting consumers, businesses, and national security interests.
As the world increasingly embraces digital currencies and blockchain technology, Pakistan’s move to regulate virtual assets is seen as an important step in integrating the country into the global financial system. The policy framework aims to balance the opportunities presented by digital finance with the need to protect the financial system from illegal activities such as money laundering and terrorist financing. By adopting a comprehensive regulatory approach, Pakistan hopes to ensure that its digital finance sector thrives in a secure and compliant manner, paving the way for long-term growth and stability in the country’s economy.
