Pakistan: a $38 billion remittance economy just reversed a seven-year ban — and the stated reason is cross-border payments

By Muhammad Bana · Global Digital Treasury · Learn / Corridors

Of all the country stories in this series, Pakistan's may be the most dramatic reversal. Two years ago, the official position on digital assets was prohibition. Today the country has a national law, a dedicated regulator, a central bank that has reopened the banking door, and senior officials openly discussing a sovereign stablecoin. And the reason they give is not speculation or technology. It is remittances.

For a market this large and this dollar-constrained, that is a significant turn. Let me lay it out.

Orientation: the scale of the flow

Pakistan is a country of over 240 million people and one of the largest remittance economies on earth. In the 2025 financial year, overseas Pakistanis sent home a record $38.3 billion — up nearly 27 percent on the prior year. The United Arab Emirates alone accounted for around 20 percent of that, and inflows from the UAE grew more than 45 percent year on year.

That is the corridor we care about most: the UAE–Pakistan link, one of the busiest remittance and trade routes in the world, anchored in the city where I sit.

The pain beneath the headline

A record remittance number hides a harder reality. Pakistan runs a chronic shortage of dollars. Through 2025, importers reported paying above the official market rate to source foreign currency, as the State Bank of Pakistan — the country's central bank — kept the market deliberately tight to manage outflows and protect thin reserves, which closed the year around $14.5 billion. The country has spent much of the period under an IMF programme, with all the discipline and constraint that implies.

So you have the familiar pattern this series keeps returning to: large, essential cross-border flows on one side; scarce and rationed dollars on the other; and businesses forced into slow banks or informal channels to bridge the gap. Pakistan has long been one of the largest users of hawala in the world precisely because the formal system could not meet the demand.

The reversal

Now the change. In 2018, the State Bank effectively banned banks from dealing with digital-asset businesses. That ban defined policy for seven years.

It is gone. Over 2025 and into 2026, Pakistan moved decisively the other way:

It passed the Virtual Assets Act 2026 — cleared by the Senate and National Assembly and signed into law by the President. The Act establishes the Pakistan Virtual Assets Regulatory Authority, or PVARA, with full power to license and supervise exchanges, custodians, and token issuers.
The State Bank formally lifted its ban, notifying banks that they may now serve providers licensed under PVARA.
PVARA has begun the licensing process, issuing initial clearances to major international exchanges to register and incorporate locally.

In roughly a year, Pakistan went from prohibition to one of the more developed digital-asset legal frameworks in the region.

The intent is explicit: remittances and settlement

What matters most is not that Pakistan legalised the sector. It is why it says it did.

The official agenda is openly built around cross-border payments. The head of PVARA has stated that Pakistan intends to launch its own stablecoin, and the government is testing dollar-linked stablecoins specifically for remittances. It has discussed tokenising up to $2 billion of government assets, announced a strategic Bitcoin reserve, allocated surplus electricity to Bitcoin mining and data centres, and signed a memorandum with a US affiliate to explore stablecoin infrastructure for cross-border payments.

You can debate how many of these ambitions will materialise — and I will, below. But the direction of policy is unambiguous. A government managing a $38 billion remittance economy and a dollar shortage has concluded that regulated digital-dollar rails are part of the answer, and has said so out loud.

The detail most people miss: Shariah compliance

One feature deserves particular attention, especially from anyone serving Muslim-majority markets. Pakistan's framework includes a Shariah Advisory Committee, making it one of the first countries to formally integrate Islamic finance principles into its digital-asset regulation.

This is not a footnote. In much of the world we work in, the acceptability of a financial instrument under Islamic principles is a precondition for mainstream adoption, not an afterthought. Building that compatibility into the law from the start removes a barrier that would otherwise slow institutional and retail uptake considerably.

What it means for treasury infrastructure

Pakistan brings together every element of the thesis in one market: enormous, essential cross-border flows; a structural dollar shortage; deep historical reliance on informal channels; a major corridor running straight through the UAE; and now a government actively building the regulated rails to formalise it.

The opportunity is the same one I keep describing, sharpened by scale. A regulated framework invites in exactly the kind of compliant orchestration layer that businesses need — one that can give a Pakistani importer or a UAE-based exporter the speed of the informal market with the governance the new law demands. The demand was never in question here. What was missing was the legal foundation. That foundation is now being poured.

My read

I will be candid about the risk, because Pakistan earns caution. The macro picture is fragile — an IMF programme, thin reserves, a history of policy reversals. Some of the bolder announcements, a sovereign stablecoin and a national Bitcoin reserve among them, are ambitions rather than achievements, and ambitions in frontier markets have a way of slipping. None of this is guaranteed to execute on the timelines suggested.

But strip away the more speculative headlines and a solid core remains: a real law, a real regulator, a reopened banking channel, and an explicit official focus on using regulated digital-dollar rails for remittances and trade. For a market of this size, on a corridor this important to us, that core is what matters. The rest is detail and timing.

Pakistan spent seven years trying to keep this technology out. It has now decided, sensibly, that the better path is to bring it inside a framework it can govern. That is the same conclusion every market in this series is reaching — Pakistan has simply reached it at greater scale, and with more at stake.