Pakistan -- Custody Regulations Regulatory Overview

As of my last update, Pakistan does not have a comprehensive or specific regulatory framework for cryptocurrency/digital asset custody. The prevailing official stance from key regulatory bodies, particularly the State Bank of Pakistan (SBP), has historically been one of prohibition, extreme caution, or active discouragement of cryptocurrencies and related activities.

Therefore, for most of the points requested, the answer is that no specific regulations exist for cryptocurrency custody in Pakistan.

Here's a breakdown:

Current Regulatory Landscape for Cryptocurrencies in Pakistan

The State Bank of Pakistan (SBP) and the Ministry of Finance have maintained a cautious and largely prohibitive stance on cryptocurrencies.

• SBP Circular (January 2018): The State Bank of Pakistan issued Circular No. 03 of 2018, titled "Prohibition of Dealing in Virtual Currencies/Tokens (VCs/ICTs)." This circular explicitly stated that VCs/ICTs are not legal tender in Pakistan and prohibited all banks, financial institutions, and payment system providers from dealing in, processing, or facilitating transactions involving VCs/ICTs.

  • Reference: State Bank of Pakistan Circular No. 03 of 2018 (Often cited in news and reports, but the direct URL can be challenging to find on SBP's current website as older circulars might be archived or superseded in internal systems. However, its content is widely known and referenced). The spirit of this circular remains dominant.

  • Update (2022-2023): While there have been ongoing discussions and government committees formed to evaluate the possibility of regulating cryptocurrencies, no formal change to the SBP's stance or new legislation has been enacted. Reports in local media suggest that committees involving the Ministry of Finance, Law Ministry, and the SBP have explored various options, including maintaining a ban or developing a regulatory framework, often influenced by FATF recommendations.

Specific Custody Regulation Requirements

Given the above, the following specific custody regulations do not exist in Pakistan for cryptocurrencies:

1. Custodial License Requirements:

   • There are no specific licenses for cryptocurrency custodians in Pakistan. Engaging in such activities might be considered contrary to existing SBP directives or fall outside the recognized financial regulatory perimeter.

2. Segregation of Client Assets Rules:

   • No specific rules for the segregation of client digital assets exist. While traditional financial institutions (like banks or brokerages) have strict client asset segregation rules under the relevant banking and securities laws (e.g., Securities Act, 2015, Banking Companies Ordinance, 1962), these do not apply to unregulated digital assets.

3. Insurance/Bonding Requirements:

   • There are no mandates for insurance or bonding requirements for digital asset custodians.

4. Cold Storage Mandates:

   • No specific mandates or best practices regarding cold storage (offline storage of private keys) for digital assets are prescribed by Pakistani regulators.

5. Qualified Custodian Definitions:

   • The concept of a "qualified custodian" for digital assets is not defined within Pakistan's regulatory framework. The term "qualified custodian" typically refers to institutions meeting specific criteria for safeguarding financial assets, and since cryptocurrencies are not recognized as such for regulatory purposes, no definition applies.

Pending Custody Legislation

While there is no specific "custody legislation" pending, there have been ongoing inter-ministerial discussions and recommendations regarding the broader regulation of virtual assets in Pakistan.

• Government Committees: Various committees have been formed by the government (e.g., under the Ministry of Finance, sometimes involving the Law Ministry, FIA, SBP, and SECP) to study cryptocurrencies.
  • Reports/Recommendations (circa 2022-2023): Some reports indicated that certain government bodies (like the Law Ministry or SBP) might favor a continued ban, while others might suggest developing a regulatory framework, often to comply with Financial Action Task Force (FATF) recommendations concerning Virtual Asset Service Providers (VASPs). Pakistan is under pressure from FATF to strengthen its anti-money laundering and counter-terrorist financing (AML/CFT) regime, which includes regulating virtual assets.
  • Reference: News reports from reputable Pakistani financial media (e.g., Dawn, The News International, Business Recorder) frequently cover these committee meetings and their preliminary recommendations. For example:
    • Dawn News (January 2022): "Govt body wants to ban cryptocurrencies" - https://www.dawn.com/news/1669460 (This indicates the general sentiment, though discussions continue).
    • Subsequent reports have indicated a more nuanced approach being considered, moving towards potential regulation rather than outright ban, but no final policy has emerged.

Conclusion:

Currently, Pakistan lacks a specific regulatory framework for cryptocurrency custody. The official stance largely prohibits or strongly discourages involvement in cryptocurrencies, rendering specific custody rules non-existent. While there are ongoing discussions at the governmental level about potentially regulating virtual assets in the future, possibly driven by FATF recommendations, no concrete legislation or policy specifically addressing digital asset custody has been enacted or formally proposed. Any entity engaging in crypto custody services would operate in a legally ambiguous or potentially prohibited environment.