SBP Circular 10 Opens the Banking System to Crypto
The State Bank of Pakistan issued Circular Letter No. 10 of 2026 on April 14, directing all regulated banks and financial institutions to open accounts for companies licensed by the Pakistan Virtual Assets Regulatory Authority (PVARA) as Virtual Asset Service Providers. The circular, published on the SBP's website, formally reverses the 2018 advisory that barred Pakistani banks from processing any virtual currency transactions.
The timing matters. Pakistan signed the Virtual Assets Act 2026 into law on March 6, creating PVARA as a standalone regulator. But a law on paper means little if exchanges still cannot access the banking system. Circular 10 is the implementation mechanism: the specific instruction from the central bank telling commercial banks exactly how to onboard crypto firms and under what conditions.
"Regulated entities, including banks and financial institutions, may now open bank accounts for companies licensed by PVARA as Virtual Asset Service Providers," the SBP stated, provided they comply with the conditions laid out in the circular.
How the Account Structure Works
The circular creates a specific account type for crypto firms: Client Money Accounts (CMAs). These are not standard business accounts. Every CMA must be:
- Rupee-denominated. No foreign currency accounts for VASPs.
- Non-remunerative. The accounts pay zero interest. Banks cannot use VASP deposits to generate yield.
- Segregated. VASP operating funds and customer funds cannot be commingled. Each CMA is purpose-limited to settling authorized transactions tied to the VASP's licensed activities.
- Cash-free. No physical cash deposits or withdrawals are permitted. All movement must flow through traceable digital channels.
The cash prohibition is a deliberate AML design choice. Pakistan's Financial Monitoring Unit operates a goAML reporting system, and forcing all VASP transactions through electronic rails ensures every rupee entering or leaving these accounts produces a digital audit trail.
Banks Cannot Touch Crypto Themselves
One of the sharpest lines in Circular 10: banks are explicitly prohibited from investing in, trading, or holding virtual assets using their own funds or customer deposits. The SBP's framework treats banks as infrastructure providers, not market participants. They can move rupees for licensed VASPs. They cannot speculate on the assets those VASPs trade.
This is the same separation that exists in several other jurisdictions. Switzerland, for instance, allows its banks to custody crypto for clients but requires separate licensing for proprietary trading. Pakistan's version is stricter: no bank participation in crypto at all, even with a license.
Due Diligence Goes Beyond Standard KYC
Before onboarding any VASP, banks must verify the firm's PVARA license directly with the regulator. Standard corporate KYC is not enough. The circular requires banks to assess:
- The nature and scale of the VASP's business
- Its customer onboarding procedures
- The type of customer base it serves
- The geographic markets in which it operates
Banks must also update their risk-profiling models to account for VASP-specific risks and maintain continuous relationship monitoring. Suspicious transactions trigger mandatory reporting to the Financial Monitoring Unit under Pakistan's Anti-Money Laundering Act, 2010.
For firms that hold No Objection Certificates but have not yet received full PVARA licenses, the circular permits limited-purpose accounts restricted to licensing formalities only. Binance and HTX both received NOCs earlier this year, positioning them as the first exchanges likely to formalize their Pakistani banking relationships.
Why This Took Eight Years
Pakistan's 2018 ban was always unusual. The SBP's Circular 03/2018 directed banks to stop processing virtual currency transactions, citing fraud and terrorism financing risks. But it was an advisory, not a statutory prohibition. The SBP itself later clarified in court filings that it never declared cryptocurrencies illegal. The result was a gray zone: 9 million Pakistanis traded crypto through peer-to-peer channels and foreign exchanges while banks pretended not to notice.
That gray zone persisted because it served everyone poorly enough to avoid a crisis but well enough to avoid action. Traders used Binance P2P and stablecoin networks. Banks avoided regulatory risk. The government collected no taxes and had no visibility into flows.
What changed was scale. Pakistan ranks third globally in crypto adoption according to Chainalysis, behind only India and the United States. Annual remittances run roughly $35 billion, and stablecoins had become a shadow rail for cross-border transfers. The government's choice became clear: regulate it or lose visibility entirely.
The Virtual Assets Act created the legal authority. Circular 10 creates the plumbing.
What Comes Next
PVARA has not yet published its full licensing regulations. The timeline for converting NOCs into operating licenses remains unclear. But the banking instruction does not wait for those details. Any VASP that obtains a PVARA license today can walk into a Pakistani bank tomorrow and open a client money account.
For the exchanges already operating in Pakistan through P2P and offshore structures, the incentive to formalize is now concrete: licensed firms get banking access, unlicensed ones face criminal penalties under the Virtual Assets Act.
The circular also opens a path for crypto payment infrastructure. Licensed VASPs with banking access can build fiat on-ramps and off-ramps that connect Pakistani rupee accounts to crypto rails, the same plumbing that card issuers and payment providers rely on in other markets.
Overview
The State Bank of Pakistan issued Circular Letter No. 10 on April 14, 2026, ordering banks to open rupee-denominated client money accounts for PVARA-licensed Virtual Asset Service Providers. The accounts are non-interest-bearing, cash-free, and segregated from VASP operating funds. Banks cannot hold or trade crypto themselves. Enhanced due diligence and continuous AML monitoring are required for every VASP relationship. The circular reverses the SBP's 2018 advisory that barred banks from processing crypto transactions, giving Pakistan's 9 million crypto holders formal banking rails for the first time in eight years.
