Pakistan to regulate cryptocurrencies and blockchain-based technologies

Pakistan is set to take up the Virtual Assets Bill 2025 to regulate cryptocurrencies and blockchain-based technologies.

Pakistan's ruling party Senator Dr Afnan Ullah Khan has introduced a private member’s bill — the Virtual Assets Bill 2025.

A copy of the bill available with Nukta states that the Virtual Assets Bill 2025 will help in launching a Digital Rupee backed by the Pakistani Rupee (PKR), as applicable under central bank regulations.

The purpose of bringing this bill is to regulate the issuance, use, trading, and utilization of virtual assets within Pakistan, backed by PKR. It involves setting up virtual asset zones, which would ensure financial stability, protect investors, prevent illegal activities, and establish the legal framework for the digital rupee to be recognized as authorized legal tender.

It also provides substantial guidelines and standards for the registration and licensing of virtual currency zones, virtual currency exchanges, and virtual asset providers.

Compliance with anti-money laundering and counterterrorism financing regulations has also been made obligatory under this act.

Furthermore, the bill helps enable transparency in the virtual currency market by organizing regular audits and reporting from entities involved in managing and trading virtual assets, which would subsequently foster and maintain trust and accountability in the financial system of Pakistan.

The bill also proposes to establish a National Virtual Assets Regulatory Commission.

The commission will help understand the virtual assets in terms of their efficacy, risks, and vulnerabilities; develop the legal and regulatory framework for managing and overseeing the virtual assets in the country; ensure registration and licensing of virtual assets zones, virtual currency exchanges, and virtual assets service providers across the country; manage and oversee the activities relevant to the functioning of virtual assets zones in the country; observe the issuance and maintenance of Pakistan rupee-backed virtual assets in the country; analyze and audit virtual assets transactions and operations; set, manage, and maintain standards for anti-money laundering and counterterrorism financing in the field of virtual assets businesses; understand the customers, through their actions and intents, involved in trading virtual assets as users or exchangers; and implement regulations and impose penalties for non-compliance.

Virtual Assets Zones

The federal government or provincial government will identify and designate specific regions. Preference will be given to such regions with abandoned, idle, or underutilized power plants that can still generate surplus electricity via renewable energy.

The commission will be responsible for maintaining a register of licenses of virtual assets zones, which will include applications for licenses received, enforcement orders linked to issued licenses, and information about revoked licenses.

License requirements

The Commission, in consultation with the concerned ministries and their relevant attached departments, shall issue licenses for all virtual currency exchanges and Virtual Assets Service Providers functioning within the country.

Applicants are required to submit evidence of business registration, prove financial stability, outline measures depicting AML/CTF compliance, and present cybersecurity protocols to the Commission.

Tax incentives

The government shall charge lesser corporate taxes on the designated virtual assets zones for the first five years of operation, subject to fulfillment of the requirements of AML/CTF compliance; ensure that virtual currency exchanges and virtual assets service providers must adhere to AML/CTF obligations, including, but not limited to, customer due diligence (CDD) and reporting suspicious activities; and ensure that entities maintain transaction records and customer identification data for a minimum of five years.

Foreign investment

To attract and incentivize foreign investors, the government will provide tax exemptions for a period of three years for these investors or entities who make contributions to local blockchain development projects or power plants.

The government will allocate one-third of the revenue generated from virtual assets operations to local infrastructure development and education programs on blockchain technology.