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he federal government’s announcement about the Pakistan Crypto Council marks a significant step in the country’s regulation of digital assets. Formally established under the directives of Prime Minister Shahbaz Sharif, the council has been tasked with developing a regulatory and operational framework that integrates crypto currencies into the formal financial system to mitigate the risk of misuse.
The parliamentary briefings revealed that the government neither seeks to promote nor to discourage crypto currency. It only aims to bring it within a lawful, structured mechanism to ensure transparency, protect consumers and prevent illicit flows. The initiative reflects an acknowledgment that crypto assets have reached a level of economic relevance that demands formal oversight.
The council, overseen by a special assistant to the prime minister, signals Pakistan’s willingness to adapt to a rapidly digitising global economy and to align its financial governance with international standards. The policy shift comes at a time when major financial jurisdictions are tightening their supervisory regimes for virtual assets.
The United States, through the coordinated efforts of the New York Department of Financial Services, the Securities and Exchange Commission, and the Office of the Comptroller of the Currency, has issued detailed guidance to strengthen custodial safeguards, disclosure obligations and the permissible scope of crypto-related banking activities. These developments are not isolated; they are part of a global recalibration toward defining clear accountability in the digital asset ecosystem.
The US approach, grounded in consumer protection and systemic risk management, offers a regulatory model that countries like Pakistan may examine closely to design their own frameworks. In September 2025, the NYDFS updated its guidance on virtual currency custodial structures, establishing explicit standards for how financial institutions should segregate, record and manage customer assets. The guidance emphasiss that the beneficial ownership of digital assets must always remain with the customer, even in the event of insolvency.
Licensed entities are now required to maintain separate accounting systems for customer assets, ensuring that digital holdings are never commingled with the institution’s corporate funds. Moreover, custodians may not deploy customer assets for proprietary use, such as collateralising loans or internal liquidity operations. These safeguards are designed to prevent the type of contagion and loss of consumer funds witnessed in several high-profile crypto collapses in recent years.
A notable addition in the NYDFS update concerns the regulation of sub-custodians, third-party entities engaged by primary custodians to hold customer assets. Institutions must now conduct due diligence on such sub-custodians, provide detailed documentation to the NYDFS and seek prior approval for material changes to their custodial structures.
Sub-custodians themselves must either be licensed by the NYDFS or subject to a regulatory regime deemed substantially equivalent. This structure creates a chain of accountability designed to eliminate opacity in asset handling and reinforce trust in custody services, which are foundational to institutional participation in digital finance.
Parallel to this, the SEC’s Division of Investment Management issued a no-action letter clarifying that state-chartered trust companies may qualify as “qualified custodians” under the Investment Advisers Act, 1940 and Investment Company Act of 1940, provided they meet specific conditions. These include state authorisation for digital asset custody, comprehensive internal controls for safeguarding private keys and cyber security and full disclosure of associated risks to clients. This position expands the scope for regulated entities to engage in digital asset custody, while ensuring that investor protection remains the central priority.
The statements issued jointly by the NYDFS and SEC demonstrate a developing regulatory framework in USA, reflecting efforts to harmonise financial innovation with the obligations of fiduciary duty. Further reinforcing this trend, the NYDFS also released guidance urging banks to incorporate block-chain analytics into their compliance and risk management systems.
By using block-chain analytics tools to trace and monitor virtual currency transactions, institutions can identify suspicious activity, assess counterparty risk and verify sources of funds. This approach aligns with broader anti-money laundering (AML) and countering the financing of terrorism (CFT) objectives, which remain key areas of concern globally. The message from US regulators is clear that responsible innovation in digital assets must be grounded in transparency, accountability and technological rigor.
The Federal Banking Agencies’ clarification on bank-permissible crypto-asset activities complements these measures. Banks seeking to engage in crypto-related services, such as custody, stable-coin issuance or tokenised deposit operations are now required to obtain supervisory non-objection prior to launch. This ensures that institutions have robust risk management and compliance mechanisms in place before participating in digital asset markets.
The framework signals that while the US is not hostile to crypto innovation, it will only proceed under well-defined prudential standards. This pragmatic approach marks a shift from regulatory uncertainty toward aligning financial stability with digital innovation.
Similar trends are emerging globally. The European Union’s Markets in Crypto-Assets (MiCA) regulation has established a harmonised framework across member states, mandating licensing requirements, capital adequacy standards and consumer disclosures for all crypto service providers.
The United Kingdom’s Financial Conduct Authority has also tightened its oversight, demanding compliance with financial promotion rules and enhanced due diligence for crypto exchanges and custodians. Together, these regulatory initiatives across the US, EU and UK establish an international consensus around safeguarding consumer assets, improving transparency and integrating crypto markets within existing financial systems rather than allowing them to operate in parallel.
For Pakistan, this global momentum provides both a reference and an opportunity. The formation of the Pakistan Crypto Council indicates recognition that unregulated crypto activity poses reputational and financial risks, especially given the country’s sensitivity to Financial Action Task Force compliance standards.
The Pakistan government has stated that it seeks neither to promote nor ban crypto. It is, however, creating a structured framework. This suggests a shift toward a middle-ground policy that balances innovation with oversight. However, the real test lies in implementation. A fragmented regulatory response, overlapping jurisdictions or lack of technical capacity could limit the council’s effectiveness. Learning from mature regulatory environments could help Pakistan avoid the pitfalls of ad hoc policymaking.
Three areas demand particular attention from policy makers. First, consumer protection must be the foundation of Pakistan’s digital asset policy. Exchanges and custodians should be required to segregate client assets, maintain detailed records of holdings and undergo regular independent audits. Disclosure obligations, similar to those under the NYDFS should ensure that investors are informed of risks, custodial arrangements and ownership rights. Establishing a national framework for crypto insurance or compensation funds could further enhance investor confidence.
Second, mitigating illicit financial flows is critical. Although the government has stated that crypto transactions have not yet significantly penetrated Pakistan’s formal system, preventive regulation is essential. The use of block-chain analytics tools already promoted in the US could be institutionalised across Pakistan’s financial intelligence units to trace suspicious transactions, monitor wallet activity and integrate with global anti-money laundering and combating the financing of terrorism networks. Licensing virtual asset service providers (VASPs) under a risk-based supervisory model, consistent with FATF’s Recommendation 15, would help ensure compliance while encouraging formal market participation.
Third, Pakistan should develop an integrated institutional structure for crypto oversight. Coordination among the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan and the Federal Investigation Agency is vital to avoid regulatory overlap and ensure coherent enforcement. A dedicated crypto regulatory sandbox, supervised jointly by these agencies under the guidance of the Crypto Council, could allow controlled experimentation with digital financial products while generating empirical data for policy design.
Pakistan’s establishment of the Crypto Council is a timely acknowledgment that the digital asset economy cannot remain unregulated. The experience of the NYDFS, the SEC and the OCC has shown that the credibility of a financial system in the digital era depends on its ability to protect consumers, enforce transparency and preempt systemic risks. For Pakistan, aligning with these global principles and tailoring them to its own legal and institutional capabilities can pave the way for a secure, innovative and resilient crypto ecosystem.
Dr Ikramul Haq, writer and advocate of the Supreme Court, is an adjunct teacher at Lahore University of Management Sciences.
Abdul Rauf Shakoori is a corporate lawyer based in the US.