Virtual assets are changing how money moves, investments are made, and financial services are delivered. From central bank digital currencies and stablecoins to cryptocurrencies and tokenised real-world assets, governments are exploring new ways to make financial systems efficient and more accessible.
For Pakistan, this presents both an opportunity and a policy challenge. The question is not simply whether it should embrace digital currencies or crypto-assets. It is which instruments can deliver tangible economic benefits, under what conditions and with what safeguards.
These instruments are often grouped together as virtual assets, but they are fundamentally different. Treating them as interchangeable could lead to policies that encourage speculation and capital outflows while overlooking opportunities to improve payments, mobilise investment and strengthen the formal economy.
A digital fiat currency, potentially a digital rupee issued by the State Bank of Pakistan (SBP), would represent SBP money in digital form. Unlike a privately issued token, it would be a direct liability of SBP. Depending on its design, it could support digital payments, improve settlement efficiency and potentially expand access to financial services.
However, it would require careful consideration of privacy, cybersecurity, operational resilience and the potential impact on commercial bank deposits. Pakistan must first establish whether a central bank digital currency would deliver meaningful benefits beyond its existing digital payment infrastructure.
Stablecoins, by contrast, are privately issued digital tokens designed to maintain a stable value, usually by reference to a currency such as the US dollar. They could facilitate certain international payments, remittances and business settlements. Yet their stability depends on the quality of their reserves, redemption arrangements and the credibility of their issuers. A stablecoin is not equivalent to a dollar deposit in a bank, and its holder may not have an unconditional claim on the underlying reserves.
For Pakistan, dollar-linked stablecoins present a particularly important policy question. They could improve the efficiency of legitimate cross-border transactions, but widespread use could also encourage dollarisation, enable value to be held outside the domestic banking system and complicate foreign-exchange management.
Cryptocurrencies, such as bitcoin and ether (ETH), serve different purposes. Their market values are generally driven by supply, demand, investor confidence and the utility of the underlying networks. They can support innovation and investment in digital-asset businesses, but their prices may fluctuate sharply, and investors can lose substantial amounts. Regulating exchanges and service providers is necessary, but it does not guarantee the value or legitimacy of every asset traded on them.
Finally, asset-backed tokens represent, or purport to represent, rights in underlying assets such as government securities, commodities, property or investment funds. Tokenisation could make certain investments more accessible, reduce transaction friction and facilitate settlement. However, a token that merely refers to an asset is not necessarily equivalent to legal ownership of it. Enforceable rights, reliable custody, transparent valuation and effective dispute resolution are essential.
The answer should be guided by economic objectives rather than technological enthusiasm. First, Pakistan should explore whether a digital rupee could improve the efficiency of domestic payments and settlement. An SBP digital currency should not be pursued simply because other countries are experimenting with one. Its benefits must justify the cost and complexity of implementation, and its design must preserve public confidence in the monetary system.
Second, stablecoins should be subject to explicit rules governing reserves, independent audits, redemption rights, segregation of customer assets and cross-border transactions. Foreign-currency stablecoins warrant particular scrutiny because of their potential implications for dollarisation and foreign-exchange controls.
Third, cryptocurrencies should operate within a clear regulatory framework covering licensing, custody, consumer protection, market conduct, taxation and anti-money laundering obligations. Pakistan’s Virtual Assets Act, 2026, and the establishment of the Pakistan Virtual Assets Regulatory Authority (PVARA) represent important steps towards a regulated market. The next challenge is ensuring this framework works coherently with the SBP’s foreign-exchange requirements and the country’s tax laws.
Licensing a virtual asset service provider should not be confused with guaranteeing the assets it trades. Nor should permission to purchase a crypto-asset automatically imply permission to transfer it abroad, sell it through any overseas platform or retain the proceeds offshore. These are separate questions that require clear legal answers.
Fourth, Pakistan should examine the potential of tokenised real-world assets to mobilise productive investment. Tokenised government securities, for example, could potentially widen access to regulated investment opportunities for smaller investors and the Pakistani diaspora. Tokenisation could also be explored for qualifying infrastructure projects and investment funds.
But the technology must not become a substitute for legal protection. Investors need clearly defined ownership or contractual rights, reliable custody, transparent disclosures and enforceable claims if an issuer fails. Where a token represents a government security, its legal status and payment rights must be unambiguous. Where it represents property or a commodity, the arrangements must establish how ownership is verified, transferred and enforced.
Pakistan should begin with use cases that can demonstrate measurable benefits. One is reducing costs associated with remittances and export receipts. Digital settlement may offer advantages, but the relevant measure is the total cost and reliability of the transaction, not simply the speed or fee of a blockchain transfer. The proceeds must also enter lawful payment channels and comply with applicable foreign-exchange rules.
A second opportunity lies in tokenised government securities and other regulated investments. If carefully designed, these could broaden investor participation and improve settlement efficiency.
A third is the development of domestic digital-finance businesses that create skilled employment, serve international markets and generate legitimate export earnings.
Each initiative should be evaluated against measurable indicators: lower transaction costs, increased formal remittances and export receipts, wider investment participation, improved tax compliance and manageable financial-stability risks. Pilot projects and regulatory sandboxes could help test these propositions before wider deployment.
This also requires coordination. SBP, PVARA, SECP, FBR and the Financial Monitoring Unit should establish clear responsibilities for payments, licensing, investment protection, taxation and financial integrity. Regulation should be proportionate to the activity and the risks involved, while protecting legitimate customer privacy.
Pakistan does not need to choose one instrument and reject the others. A digital rupee, stablecoins, cryptocurrencies and asset-backed tokens can coexist within a coherent financial system, provided each is regulated according to its economic function and the rights it creates.
The central distinction is straightforward: digital fiat currency is central bank money; a stablecoin is a privately issued token whose stability depends on its arrangements; an unbacked cryptocurrency derives its market value from demand and other market factors; and an asset-backed token depends on the rights attached to an underlying asset.
Pakistan needs to look beyond the hype surrounding virtual assets and develop a framework that supports innovation, attracts investment and protects monetary sovereignty. The objective should be to encourage technologies that improve financial efficiency and channel capital towards productive activity, while preventing consumer harm, unmanaged capital outflows and threats to monetary sovereignty.
The goal should not be to digitise money or support virtual assets for its own sake, but to make these virtual assets serve Pakistan’s economy.
