Pakistan faces a question regulators worldwide are struggling with: how do you regulate a financial ecosystem that operates across national borders and can be accessed by anyone with a smartphone?

The scale of Pakistan’s crypto economy makes the question particularly important.

The Chairman of the Pakistan Virtual Assets Regulatory Authority (PVARA), Bilal Bin Saqib, recently told a Senate committee that approximately 40 million Pakistanis have crypto-linked accounts. He estimated Pakistanis hold between $10 billion and $20bn in crypto assets outside Pakistan. Chainalysis ranked Pakistan third globally in its 2025 Global Crypto Adoption Index, behind India and the United States. Pakistan ranked second for retail activity through centralised crypto services.

What is remarkable is that much of this ecosystem developed outside Pakistan’s traditional financial system and clearly violates current State Bank of Pakistan regulations. However, Pakistanis can download an app like Binance, open a USDT account, and then make a rupee transfer via Raast or inter-bank fund transfer to local facilitators listed on the app, getting USDT credited to their offshore account through ‘institutional’ hawala.

Controlling access to a global digital financial network is considerably more difficult than regulating local institutions

They can acquire USDT, hold digital assets in offshore or self-custodied wallets, transfer them internationally and increasingly use those assets for payments. The arrival of stablecoin-funded international cards makes the regulatory challenge even more interesting. Companies such as RedotPay and Fasset illustrate how quickly the distinction between cryptocurrency and conventional payments is disappearing. A consumer can hold USDT and use a card linked to those digital assets to make purchases through the international payments infrastructure in Pakistan.

The number of Pakistani customers using these services is not publicly disclosed. It would therefore be misleading to claim a specific figure. Nevertheless, if Pakistan really has tens of millions of crypto-linked accounts and $10–20bn of Pakistani capital invested in virtual assets, the potential market for offshore crypto-linked financial services is clearly substantial.

A Pakistani consumer can acquire USDT from another individual, transfer it to a wallet operated by an international company and use a foreign-issued virtual card to purchase goods or services. The customer may be in Pakistan, but the crypto platform could be licensed in another jurisdiction. The digital asset exists on a global blockchain. The card programme could operate from another country, while the merchant could be somewhere else entirely or in Pakistan.

That raises the question: Which regulator controls that transaction? No single regulator completely does.

If Pakistan really has tens of millions of crypto-linked accounts and $10–20bn of capital invested in virtual assets, the potential market for offshore crypto-linked financial services is clearly substantial

This does not mean governments are powerless. They can regulate domestic banks, payment companies, exchanges, fiat on-ramps and off-ramps. They can require locally operating businesses to identify customers, monitor transactions, maintain records and report suspicious activity. But controlling access to a global digital financial network is considerably more difficult.

Pakistan has responded by creating PVARA and establishing a formal licensing framework for Virtual Asset Service Providers. Companies wishing to offer virtual-asset services in Pakistan are required to enter the regulatory framework, establish the appropriate local presence and comply with requirements including know-your-customer (KYC), anti-money laundering and combating the financing of terrorism, transaction monitoring and record-keeping.

This is an important development since it creates an opportunity for reputable international crypto companies to regularise their operations and participate legitimately in one of the world’s largest crypto markets.

The more difficult question is why Pakistan’s existing crypto users would move from offshore platforms into the regulated domestic ecosystem. For regulators, greater KYC, transaction monitoring and tax transparency are essential characteristics of a legitimate financial system.

For some existing crypto users, however, those same requirements may represent additional friction. This does not mean offshore crypto lacks KYC. However, they do not verify the primary document. This, plus the fact that their assets, accounts and transaction records sit outside Pakistan’s immediate financial and tax-reporting infrastructure, is a key consideration.

That creates the central challenge for PVARA. Pakistan can require a company seeking to operate formally in the country to obtain regulatory approval. But preventing an individual from accessing an offshore wallet, exchange or blockchain application through the internet is much harder. And this phenomenon is not unique to Pakistan. It is inherent in the architecture of digital assets. The solution therefore cannot depend solely on enforcement.

Pakistan’s regulated crypto ecosystem must become more attractive than the offshore alternative. That means easy conversion between rupees and digital assets, integration with banks and payment systems, competitive transaction costs, consumer protection, efficient dispute resolution and legitimate everyday applications. Most importantly, users need to see a benefit from becoming part of the regulated system.

PVARA has an opportunity to bring a huge existing digital-asset economy into Pakistan’s formal financial architecture. But issuing licences may prove to be the easier part. The real test will be persuading millions of existing crypto users that moving into the regulated ecosystem is actually in their interest. That is perhaps the larger lesson for regulators everywhere.

In a borderless financial system, regulation cannot rely solely on control. It must also compete.

The writer is the chairman of the Pakistan Fintech Network

Published in Dawn, The Business and Finance Weekly, September 28th, 2026