The global regulatory landscape for virtual assets is rapidly evolving, with jurisdictions worldwide establishing frameworks to manage associated risks and opportunities. For virtual asset service providers (VASPs) considering international expansion or seeking to understand their obligations, navigating these diverse regulatory environments is crucial. Understanding the nuances between different national approaches can significantly impact operational strategy, compliance costs, and market entry decisions.
Pakistan, through the proposed Virtual Assets Regulatory Authority (PVARA) framework, is developing its comprehensive regulatory regime. Meanwhile, the United Kingdom has an established, albeit evolving, system primarily focused on anti-money laundering and counter-terrorist financing (AML/CFT) for crypto businesses, with broader regulatory discussions ongoing. This comparison aims to shed light on the distinct paths these two nations are taking, offering insights for operators.
For any VASP, comprehending these differences is not merely an academic exercise; it directly affects business models, licensing requirements, and the scope of permissible activities. As both frameworks mature, operators must remain vigilant to ensure continuous compliance and strategic alignment with regulatory expectations.
What is the current regulatory status of virtual assets in Pakistan and the UK?
Pakistan’s virtual asset framework is currently under development, with the proposed PVARA framework designed to establish a comprehensive licensing and oversight regime for virtual assets and VASPs. The UK has an existing registration regime for cryptoasset businesses under AML/CFT regulations, overseen by the Financial Conduct Authority (FCA), while also exploring broader regulatory controls.
In Pakistan, the journey towards a formal regulatory framework for virtual assets has been a complex one. Initially, there were significant debates and cautionary statements from authorities like the State Bank of Pakistan and the Securities and Exchange Commission of Pakistan (SECP) regarding the risks associated with virtual assets. However, influenced by international standards set by the Financial Action Task Force (FATF), and recognising the need for a structured approach, Pakistan has moved towards establishing a dedicated regulatory body and framework. The proposed PVARA framework aims to bring clarity and legitimacy to the sector, moving beyond the previous ambiguities where Pakistani courts have treated virtual assets with caution. It is important to note that as of August 2026, the PVARA framework is still largely at the consultation stage, meaning specific rules and requirements are subject to change. Operators should regularly check for regulatory updates.
The UK’s approach has been more incremental. Since January 2020, cryptoasset businesses operating in the UK have been required to register with the FCA for AML/CFT purposes. This registration covers firms dealing with exchange, custody, and certain other activities involving cryptoassets. The UK government has also been actively consulting on a broader regulatory framework for cryptoassets, including proposals to regulate a wider range of cryptoasset activities and services, bringing them under existing financial services legislation. This includes discussions around financial promotions, market abuse, and the regulation of stablecoins. The UK’s framework, therefore, combines an established AML/CFT registration with ongoing efforts to expand prudential and conduct regulation.
Which entities are regulated under each framework?
In Pakistan, the proposed PVARA framework is expected to regulate a broad spectrum of Virtual Asset Service Providers (VASPs), encompassing exchanges, custodians, transfer services, and initial coin offering (ICO) platforms. The UK’s current AML/CFT regime primarily targets cryptoasset exchange providers and custodian wallet providers, with future proposals aiming to expand this scope to other cryptoasset activities.
The definition of a VASP under the proposed Pakistani framework is anticipated to align closely with FATF Recommendation 15, which broadly includes any natural or legal person that, as a business, conducts one or more of the following activities or operations for or on behalf of another natural or legal person:
- Exchange between virtual assets and fiat currencies.
- Exchange between one or more forms of virtual assets.
- Transfer of virtual assets.
- Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets.
- Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.
This comprehensive scope means that a wide array of businesses, from simple exchange platforms to more complex decentralised finance (DeFi) protocols, may fall within the licensing perimeter. For more detail on who needs a VASP licence in Pakistan, operators can refer to our guide on the topic. The framework is also expected to categorise licences, meaning different types of VASPs will have specific obligations.
In the UK, the current AML/CFT registration requirement applies specifically to firms carrying on ‘cryptoasset activity’, which is defined as:
- Exchanging cryptoassets for fiat currency or vice versa.
- Exchanging one cryptoasset for another.
- Operating a cryptoasset ATM.
- Providing custodian wallet services.
The ongoing consultations in the UK suggest that the regulatory perimeter will expand significantly to cover activities such as operating a trading venue, providing cryptoasset lending, and issuing certain types of cryptoassets, particularly stablecoins. This expansion would bring a much broader range of firms under direct financial services regulation, not just AML/CFT.
What are the key licensing requirements?
Pakistan’s proposed PVARA framework is expected to impose robust licensing requirements, including significant capital requirements, stringent fit and proper tests for directors, and comprehensive operational and technical standards. The UK’s current AML/CFT regime requires firms to demonstrate effective AML/CFT systems and controls, while future proposals will introduce more extensive prudential and conduct requirements.
For operators seeking a VASP licence in Pakistan, the requirements are likely to be multi-faceted. These will include:
- Corporate Structure: Establishing a suitable corporate structure for a Pakistani VASP, often requiring local incorporation.
- Capital Requirements: Firms will need to meet specific minimum capital thresholds, which will vary based on the licence category. These are designed to ensure financial stability and protect consumers. Our article on VASP capital requirements in Pakistan provides further details.
- Fit and Proper Tests: Directors, senior management, and significant shareholders will undergo thorough assessments to ensure they are competent, honest, and financially sound. This is a common international practice to prevent illicit actors from entering the financial system.
- Governance and Risk Management: Comprehensive policies and procedures for risk management, internal controls, and corporate governance will be mandatory.
- Cybersecurity: Robust cybersecurity requirements for licensed virtual asset firms are anticipated to protect client assets and data.
- Business Plan: A detailed business plan outlining the VASP’s operations, target market, and financial projections.
In the UK, the existing AML/CFT registration focuses on the adequacy of a firm’s systems and controls to prevent money laundering and terrorist financing. This includes:
- Risk Assessments: Demonstrating a thorough understanding of money laundering and terrorist financing risks.
- Policies and Procedures: Implementing effective AML/CFT policies, controls, and procedures, including customer due diligence (CDD) and transaction monitoring.
- Compliance Officer: Appointing a designated Money Laundering Reporting Officer (MLRO) who meets the FCA’s fit and proper criteria. Our analysis of the MLRO role in Pakistan’s virtual asset sector highlights similar expectations.
Future UK proposals for broader regulation would introduce requirements similar to those for traditional financial services firms, such as prudential requirements (capital and liquidity), operational resilience, and conduct rules designed to protect consumers and market integrity.
How do AML/CFT obligations compare?
Both Pakistan’s proposed PVARA framework and the UK’s existing regime are heavily influenced by FATF standards, requiring robust AML/CFT measures, including customer due diligence, transaction monitoring, and suspicious transaction reporting. Pakistan is expected to implement the Travel Rule, while the UK has already done so for registered cryptoasset businesses.
The FATF Recommendation 15 forms the bedrock of AML/CFT requirements for virtual assets globally, and both jurisdictions are committed to its implementation. For Pakistan, the proposed framework will mandate:
- Customer Due Diligence (CDD): Implementing comprehensive Know Your Customer (KYC) and CDD processes, requiring VASPs to identify and verify their customers’ identities and beneficial ownership for crypto licences.
- Transaction Monitoring: Establishing systems to monitor transactions for suspicious activities and report them to the Financial Monitoring Unit (FMU). This includes setting rules and thresholds for crypto transaction monitoring.
- Suspicious Transaction Reports (STRs): Obligation to file STRs when there are reasonable grounds to suspect money laundering or terrorist financing. Understanding what constitutes a suspicious transaction report is vital for VASPs.
- Record Keeping: Maintaining records of transactions and customer data for a prescribed period, aligning with VASP record keeping obligations.
- Travel Rule: The PVARA framework is expected to incorporate the Travel Rule, requiring VASPs to collect and transmit originator and beneficiary information for virtual asset transfers above a certain threshold. Our article on understanding the Travel Rule for Pakistani VASPs provides further context.
- Sanctions Screening: Implementing effective sanctions screening for virtual asset firms to comply with national and international sanctions regimes.
The UK’s AML/CFT regime, enforced by the FCA, already requires registered cryptoasset businesses to comply with similar obligations. These include:
- Enhanced CDD: For higher-risk customers or transactions.
- Ongoing Monitoring: Continuous monitoring of business relationships.
- Risk-Based Approach: Applying a risk-based approach to AML/CFT, tailoring controls to the specific risks faced by the business.
- Travel Rule Implementation: The UK was an early adopter of the Travel Rule for cryptoasset transfers, requiring firms to exchange information on transactions.
While the principles are similar due to FATF influence, the specific implementation details, supervisory intensity, and enforcement powers may differ. For instance, PVARA’s enforcement powers will be a critical aspect for operators to understand.
What about consumer protection and market integrity?
Pakistan’s proposed PVARA framework is expected to include provisions for consumer protection, such as client asset segregation and complaints handling mechanisms, alongside rules for market conduct. The UK is actively developing a broader regulatory framework to extend consumer protection and market integrity rules, including financial promotions and market abuse, to cryptoassets.
Consumer protection is a growing focus for virtual asset regulators globally. In Pakistan, the PVARA framework is anticipated to address this through several mechanisms:
- Client Asset Segregation: Rules on how client virtual assets must be segregated from the VASP’s own assets to protect them in case of insolvency. This is a crucial aspect of custody rules.
- Complaints Handling: Requirements for VASPs to establish clear and accessible processes for handling customer complaints and providing client redress.
- Marketing and Advertising: Specific rules on marketing and advertising for crypto firms to ensure fair, clear, and not misleading communications.
- Disclosure Requirements: Transparency obligations regarding fees, risks, and the nature of virtual assets.
The UK’s approach to consumer protection for cryptoassets has been evolving. While the current AML/CFT regime does not directly cover consumer protection or market integrity, the FCA has been using its powers to warn consumers about risks and has implemented specific rules for cryptoasset financial promotions. The ongoing regulatory reform aims to:
- Regulate Financial Promotions: Bring a wider range of cryptoasset promotions under the existing financial promotions regime, ensuring they are fair, clear, and not misleading.
- Market Abuse Regime: Extend the existing market abuse regime to cover certain cryptoassets, prohibiting activities like insider dealing and market manipulation.
- Operational Resilience: Requirements for firms to maintain operational resilience to minimise disruption to services and harm to consumers.
- Prudential Standards: For certain regulated cryptoasset activities, prudential standards may be introduced to safeguard client funds and ensure the financial soundness of firms.
How do the regulators approach innovation?
Pakistan’s proposed PVARA framework aims to foster innovation within a regulated environment, providing clarity for emerging technologies like stablecoins and NFTs. The UK has a well-established regulatory sandbox and innovation hub at the FCA, actively engaging with new technologies and business models within the cryptoasset space.
Innovation is a double-edged sword for regulators – it brings economic opportunities but also new risks. In Pakistan, the establishment of PVARA itself is a move towards providing regulatory certainty, which is a prerequisite for responsible innovation. The framework is expected to:
- Provide Clarity for New Asset Classes: Define how assets like stablecoins are treated under Pakistani regulation and when NFTs become regulated under virtual asset rules.
- Address DeFi: Provide guidance on DeFi and the licensing perimeter, clarifying who is actually regulated in decentralised ecosystems.
- Encourage Dialogue: The regulatory consultation process itself is a way to engage with the industry and understand innovative business models. Sarzif Policy encourages participation in responding to virtual asset regulatory consultations.
The UK, through the FCA, has been a pioneer in regulatory innovation:
- Regulatory Sandbox: The FCA’s sandbox allows firms to test innovative products and services in a live market environment with regulatory oversight and safeguards. This provides a safe space for innovation without immediate full regulatory burden.
- Innovation Hub: The FCA’s Innovation Hub offers direct support to firms developing innovative propositions, helping them understand the regulatory framework.
- Engagement with New Technologies: The FCA actively engages with new technologies like distributed ledger technology (DLT) and explores how existing regulations can apply or need to be adapted.
While Pakistan’s framework is still nascent, the intent appears to be to create an environment that supports responsible innovation by providing clear rules. The UK’s approach is more hands-on through its established innovation support mechanisms.
What are the ongoing compliance obligations?
Licensed VASPs in Pakistan under the proposed PVARA framework will face continuous obligations, including regular regulatory reporting, adherence to licence conditions, and ongoing AML/CFT compliance. UK-registered cryptoasset businesses must maintain their AML/CFT systems and report suspicious activities, with future regulations set to introduce broader ongoing compliance duties.
Obtaining a licence is just the beginning; maintaining it requires continuous adherence to regulatory requirements. For VASPs in Pakistan, ongoing obligations are expected to include:
- Regulatory Reporting: Regular submission of financial, operational, and compliance reports to PVARA. Our VASP regulatory reporting calendar for Pakistan provides an overview.
- Licence Conditions: Adhering to all specific licence conditions that continue after approval, covering areas like corporate governance, risk management, and operational standards.
- AML/CFT Compliance: Continuous monitoring of transactions, updating CDD records, and filing STRs as required. This also includes adhering to the Travel Rule and sanctions screening.
- Outsourcing and Third-Party Risk: Managing outsourcing risk for Pakistan’s virtual asset firms, ensuring that outsourced activities comply with regulatory standards.
- Business Continuity Planning: Maintaining robust business continuity planning for VASPs to ensure resilience against disruptions.
- Cybersecurity: Ongoing compliance with cybersecurity requirements, including regular audits and updates.
- Market Surveillance: For exchanges, implementing market surveillance for crypto to detect and prevent market abuse.
In the UK, registered cryptoasset businesses currently have ongoing obligations related to AML/CFT, including:
- Maintaining AML/CFT Systems: Ensuring that their policies, controls, and procedures remain effective and up-to-date.
- Annual Financial Crime Report: Submitting an annual report to the FCA on financial crime risks and controls.
- Reporting Breaches: Notifying the FCA of any material breaches of AML/CFT requirements.
With the expansion of the UK’s regulatory perimeter, future ongoing obligations are likely to mirror those of traditional financial services firms, including:
- Prudential Reporting: Regular reporting on capital and liquidity positions.
- Conduct Rules Compliance: Adhering to rules designed to ensure fair treatment of customers and market integrity.
- Operational Resilience Reporting: Demonstrating and reporting on operational resilience capabilities.
Both jurisdictions emphasise continuous compliance, but Pakistan’s framework, being comprehensive from the outset, will likely impose a broader set of ongoing obligations across various aspects of a VASP’s operations, rather than just AML/CFT. Operators can find more information about the PVARA framework at https://pvara.org.
About this analysis
This analysis was prepared by Sarzif Policy, an independent research desk in Islamabad. It draws upon publicly available information regarding Pakistan’s proposed Virtual Assets Regulatory Authority (PVARA) framework, statements from Pakistani regulatory bodies such as the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan (SECP), and the Federal Board of Revenue (FBR), as well as international standards set by the Financial Action Task Force (FATF). Information on the UK approach is based on the Financial Conduct Authority (FCA) regulations and government consultations.
Given that Pakistan’s PVARA framework is currently at the consultation stage, all specific requirements, thresholds, and timelines mentioned are subject to change and finalisation. Operators are strongly advised to verify the latest regulations and requirements directly with PVARA or relevant Pakistani authorities. This article is intended for informational purposes only and does not constitute legal or professional advice. For specific guidance, please consult a qualified legal professional. For more information about Sarzif Policy or our editorial policy, please visit our respective pages.
