Pakistan sets up new watchdog as central bank readies CBDC

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Pakistan has launched a new digital asset industry regulator in its latest effort to become the Asian ‘crypto’ hub.

The Pakistani government has moved rapidly this year to create an enabling environment for digital assets. In March, it launched the Pakistan Crypto Council to champion the sector’s interests. Two months later, it revealed it was working on a new oversight body, then known as the Pakistan Digital Asset Authority (PDAA).

This initiative has now culminated in the Pakistan Virtual Asset Regulatory Authority (PVARA), which will supervise, monitor, and license virtual asset service providers (VASPs), ensuring compliance with local regulations and international standards from the Financial Action Task Force (FATF) and others.

According to local outlet Dawn, PVARA was approved by the federal Cabinet this week.

“Once legislated, the authority will be responsible for issuing licences, supervising VASPs, setting technical standards, and coordinating compliance with FATF, IMF, and World Bank guidelines,” a statement from the Ministry of Finance said on Tuesday.

A separate statement on Thursday revealed that PVARA had been formed through President Asif Ali Zardari’s approval of the Virtual Assets Ordinance, 2025. In Pakistan, the president has the authority to issue an ordinance on any urgent issue, and it doesn’t have to go through parliament. The ordinance will remain in effect for four months before legislators require it to be ratified.

The ordinance defines PVARA as “an autonomous federal body empowered to license, regulate and supervise entities dealing in virtual assets.”

It further prescribes that any VASP that intends to serve Pakistani investors must obtain a license from the watchdog. PVARA must introduce a new licensing framework with clear guidelines on operational capacity, compliance obligations, and reporting frameworks.

“The ordinance also incorporates a framework for responsible innovation by establishing a regulatory sandbox, allowing emerging technologies and business models to be tested under supervisory oversight,” the statement from the Finance Ministry added.

PVARA can allow some VASPs to experiment with specific products for a defined period through a relief letter, similar to regulatory sandboxes.

Others include the secretaries of key ministries such as finance, justice, and Information and Communication Technology (ICT). Additionally, the government will appoint two independent directors with longstanding expertise in digital assets and financial technology.

With Pakistan being an Islamic state, the ordinance mandates the formation of a Sharia Advisory Committee to advise PVARA on issues relating to Sharia compliance.

VASPs that oppose PVARA’s decisions and guidelines can appeal to the Virtual Assets Appellate Tribunal, whose rulings must be independent and unbiased, as per the new ordinance.

Pakistan eyes CBDC

Amid the rapid digital asset adoption, the SBP plans to launch a pilot for a central bank digital currency (CBDC), Governor Jameel Ahmad has revealed.

The governor spoke at the Reuters NEXT Asia summit, held in Singapore, on Wednesday, where he said the central bank has been building up its capacity for a digital rupee and that it would commence the pilot soon.

Unlike some of its Asian peers, like China and Thailand, Pakistan has dragged its feet on the CBDC front. Despite first announcing it was exploring a digital rupee in 2019, little has come of its efforts. In 2023, the SBP said it would accelerate the project, aiming for a 2025 launch, but yet again, the project stalled.

While Pakistan remains hesitant, others like Australia are picking up pace. On Thursday, the Reserve Bank of Australia (RBA) announced that it had selected over a dozen participants for Project Acacia, its wholesale CBDC and tokenized deposits project.

The participants include Westpac Banking Corporation, Fireblocks, Northern Trust (NASDAQ: NTRS), Australian Payments Plus, and the Commonwealth Bank of Australia.

The pilot will test 24 use cases, 19 of which involve transactions in real assets and real money, and five proof-of-concept (PoC) use cases involving simulated transactions.

“The use cases selected in this project will help us to better understand how innovations in central bank and private digital money, alongside payments infrastructure, might help to uplift the functioning of wholesale financial markets in Australia,” commented Brad Jones, the RBA Assistant Governor.

Watch: The state of play and what’s to come with CBDCs