On April 15, a circular from the State Bank of Pakistan changed the rules for 220 million people. Banks can now open accounts for licensed virtual asset service providers. After seven years of treating crypto as prohibited, Pakistan has moved toward regulation.
The headlines focused on the announcement, and markets reacted. However, the more important issue is this: the legal framework is now in place, but the operational systems required to enforce it at scale are still being developed. How this gap is addressed over the next six to twelve months will determine whether this becomes a structural shift or a missed opportunity.
I have spent two decades building enterprise software and compliance systems for large companies in Silicon Valley, and I have seen this pattern repeatedly. Announcements are straightforward. Execution is where systems either function effectively or fail. What is happening in Pakistan now resembles early cloud regulation in the United States: the intent and framework were present, but enforcement capacity was the limiting factor.
An Existing Market
Before considering what comes next, it is important to understand the current situation. By most estimates, around forty million Pakistanis were already using cryptocurrency before regulation was introduced. Activity included trading on international exchanges, peer-to-peer transfers, and blockchain-based business activity, largely outside formal regulatory oversight.
This activity did not begin on April 15. It has developed over several years. The Virtual Assets Act did not create demand; it formalized an existing market.
The task for the newly established Pakistan Virtual Assets Regulatory Authority (PVARA) is to bring this activity into a regulated system. International attention, including from the Financial Action Task Force (FATF), will focus on enforcement capacity as much as legal structure.
The Operational Challenge
Under the new framework, entities conducting virtual asset activities in Pakistan are required to obtain licenses. The regulatory sandbox, opened in March, is already receiving applications.
Each application is reviewed across multiple areas, including technology infrastructure, cybersecurity controls, anti-money laundering compliance, financial projections, consumer protection measures, and exit planning.
This is a document-intensive review process requiring detailed technical and regulatory assessment. It involves cross-checking submissions, evaluating evidence, and making case-by-case judgments.
At present, this process is largely manual. Analysts review documents and prepare written assessments, which then move through internal approval stages. This approach is workable at low volume, but the scope of the law is broad. It covers exchanges, custodians, and token issuers, among others. Application volume is expected to increase.
Similar challenges have appeared in other jurisdictions. When document-heavy regulatory processes scale without automation, delays increase, backlogs form, and consistency becomes harder to maintain. Most regulators face this issue at some stage.
Internal Perspective
I lead a company that develops AI-based systems for compliance workflows. My team has been in discussions with PVARA’s licensing group regarding potential use of AI in the sandbox review process.
Under the leadership of Bilal Bin Saqib, the organization appears aware of the scaling challenge. There is recognition that manual review alone may not be sufficient as application volume increases, and there is openness to technology-assisted approaches.
The proposed approach is not to replace human reviewers. Instead, it is to structure incoming applications so that systems can map submitted documentation against regulatory requirements, identify gaps, and present findings for human review.
This would shift reviewer work from reading full submissions to evaluating structured outputs supported by references to source documents.
A similar approach can also be applied to post-approval monitoring, where licensed entities must remain within defined operating conditions and report incidents within specified timeframes.
Structural Timing Advantage
New regulatory systems often evolve based on existing institutional patterns. In many jurisdictions, workflows are designed around manual processes first, with digitization added later.
Pakistan’s framework is still in early stages of implementation. The sandbox, licensing process, and enforcement mechanisms are still being developed. This creates a window where operational design decisions are still flexible.
Once processes become standardized and embedded, changing them becomes significantly more difficult and typically requires large-scale institutional change.
Several regional jurisdictions, including the UAE, EU, Qatar, Saudi Arabia, and Bahrain, are also developing virtual asset regulatory frameworks. Many of these systems are already built around established procedural models.
The Key Test
Pakistan now has three elements in place: a legal framework, a regulatory authority, and an active market.
The next phase is operational. The key challenge is not digitization of documents, but whether regulatory systems can be designed to evaluate technical compliance efficiently and consistently at scale.
The Virtual Assets Act established the legal basis. The State Bank circular enabled banking access. The remaining challenge is the design of enforcement and review systems that can operate at scale without losing consistency or credibility.
The outcome will depend on how quickly operational systems adapt to the volume and complexity of the market.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of ProPakistani. The content is provided for informational purposes only and is not intended as professional advice. ProPakistani does not endorse any products, services, or opinions mentioned in the article.
