Under Article 89 of the constitution, the president may promulgate an ordinance when parliament is not in session, and it shall be published in the official gazette.
Before jumping into a careful analysis of the 2025 Virtual Assets Ordinance, let’s see the nature of such legislation. An ordinance can be explained as a temporary law given effect by the president of Pakistan when parliament is not in session. It has the same force as an act but remains valid for a limited period, unless extended or replaced by legislation. Unlike an act of parliament, which is passed through legislative debate and voting, an ordinance is executive lawmaking.
Previously, no formal law addressed virtual assets in Pakistan; the ordinance is the first of its kind, having actual legal effect rather than mere advisory provisions as seen in the past. The ordinance establishes an autonomous regulatory authority to oversee the virtual assets sector and lays down its organisational structure, its powers, functions and governance mechanisms.
With crypto adoption on the rise in Pakistan, the formation of this regulatory body would be timely. According to data from Triple-A, a global crypto adoption research firm, Pakistan had an estimated 10.4 million cryptocurrency users as of 2023, reflecting a significant upward trend. With such aggressive adoption statistics, it is no surprise that the risk of digital asset scams and misuse, such as terror financing, fraud and individual disputes, will be on the rise as well. To tackle such issues, a regulatory body would ensure a safe route towards digital asset adoption, mitigating the risks that come along the way. Through these regulatory efforts, the government also becomes one of the biggest beneficiaries of embracing digital assets.
As laid down by the ordinance, the regulatory authority will be licensing Virtual Asset Service Providers and Issuers; this opens a scheme of economic opportunities for the local government through the collection of licensing fees as well as tax opportunities. As the world recognises Pakistan’s efforts to become a digital asset-friendly jurisdiction, the chances of attracting foreign investment from international firms and investors also increase.
The ordinance implicitly addresses the consumer protection aspect; it introduces long-needed consumer protection in a volatile and unregulated market. It mandates clear risk disclosures, requires segregation of user funds, and empowers the regulatory authority to offer dispute resolution mechanisms; safeguards absent in Pakistan’s existing consumer protection laws (in the context of digital assets).
In a country where youth-driven crypto adoption is exploding, such provisions are essential to prevent exploitation and build public trust. By grounding these protections in enforceable law, the ordinance not only aligns with the FATF and international norms but also fills a regulatory void left by outdated consumer statutes ill-equipped to handle virtual assets. One of the most strategically important aspects of the 2025 Virtual Assets Ordinance is its alignment with Pakistan’s international AML/CFT obligations.
After exiting the FATF grey list in 2022, Pakistan must maintain strict oversight to avoid re-listing. The ordinance mirrors key elements of FATF Recommendation 15, such as mandatory licensing of Virtual Asset Service Providers, due diligence, record-keeping, and inter-agency coordination. These provisions not only strengthen Pakistan’s domestic financial safeguards against money laundering and terror financing but also reinforce its global financial legitimacy at a critical time.
However, potential challenges must be addressed. The success of such an enactment does not merely depend upon the creation of a regulatory authority but also on the alliance between the operation of relevant institutions, especially where mandates come into conflict or overlap. The newly formed regulatory authority must work closely with the SBP, SECP, FIA and FBR, each of which has overlapping mandates in finance, enforcement, or taxation. Notably, the State Bank’s historic opposition to cryptocurrencies as legal tender, grounded in its 2018 ban and its exclusive authority under Section 25 of the State Bank of Pakistan Act, 1956 to regulate legal tender, poses a direct conflict with the ordinance’s licensing regime.
Under the Foreign Exchange Regulation Act, 1947 (FERA), the SBP also retains control over cross-border financial transactions, which include restrictions on crypto asset movement. Without a harmonised legal and regulatory framework, licensed VASPs may be denied access to essential banking services, rendering the licensing structure under the Ordinance functionally ineffective. To resolve this conflict, it is imperative that parliament consider amendments to the SBP Act, 1956 and FERA 1947, or issue harmonising legislation or inter-agency rules that clearly delineate the scope and authority of the new regulatory authority vis-a-vis the central bank.
Similarly, coordination with the SECP and FIA is vital to avoid regulatory confusion and enforce crypto-related fraud investigations. Without a precise mechanism for institutional synergy, even a well-designed ordinance may falter in execution. Subsequently, the effectiveness of the regulatory authority hinges on whether it has the institutional capacity to handle a fast-moving and technically complex sector.
Pakistan’s regulatory bodies face serious capacity challenges. The Financial Monitoring Unit was criticised by the FATF in 2019 for understaffing and outdated tech. Effective crypto regulation requires blockchain analytics, cybersecurity expertise and tools to track cross-border flows – capabilities Pakistan currently lacks. If the new authority inherits similar weaknesses, it may struggle to ensure compliance or counter crypto-related threats. Without focused investment in skilled personnel, cybersecurity systems, and international collaboration, the ordinance risks failing at the implementation stage, repeating past patterns of under-resourced reforms.
It is also important to consider the rights and privacy concerns raised by the ordinance. Licensing, surveillance and compliance mechanisms, particularly those under AML/CFT obligations, could result in extensive monitoring of user wallets, transaction histories and IP addresses. While such measures may be necessary to prevent financial crime, unchecked surveillance powers risk infringing on constitutional privacy rights, especially given Pakistan’s weak data protection laws. According to the Digital Rights Foundation, the country’s legal framework provides inadequate safeguards against state-led data overreach. Activists have repeatedly raised concerns about the Prevention of Electronic Crimes Act, 2016 (Peca), citing its vague language and potential for misuse.
Therefore, the ordinance must be implemented with transparency, judicial oversight and clearly defined data protection rules to ensure that financial regulation does not come at the expense of fundamental privacy rights.
Finally, the temporary nature of the ordinance – enacted under Article 89 – raises questions about legal continuity, which is essential for long-term investor confidence. While the Virtual Assets Ordinance marks a significant step toward a new era in Pakistan’s financial and technological landscape, it is by no means sufficient on its own. A long road still lies ahead.
The writer is a lawyer based in Islamabad.