Over the past two decades, fintech has not only reshaped global markets but also disrupted traditional banking and payment models, opening up new opportunities and new risks. Pakistan, with its rapidly growing digital economy, expanding e-commerce ecosystem, and rising consumer base, stands at a critical juncture. The country has made notable strides in financial innovation, from mobile banking and branchless wallets to open APIs and government-led digital initiatives.
The shift toward a more structured yet disruptive financial landscape was the focus of the FinFyreSide, the opening segment of the Fintech Forward Forum 2025. Held on September 23 in Karachi, the forum was a highlight of ITCN Asia and programmed by PakBanker. This inaugural session, titled “Inside the Engine Room: In Dialogue with Leadership,” featured Khurram Schehzad, Advisor to the Finance Minister, in a deep-dive conversation moderated by Aqsa Tariq. The dialogue set the stage for the forum, moving beyond the simple adoption of technology to discuss a fundamental restructuring of the relationship between government, traditional finance, and the consumer.
Watch the highlight from the event here:
The Scale of the Digital Asset Economy
The regulatory framework for digital assets is fundamentally a question of managing public money, and in Pakistan, the numbers involved are extraordinary. Current estimates suggest that between 20 to 25 million people in Pakistan trade in cryptocurrencies, making it the fifth or sixth largest market in the world.
Mr. Schehzad emphasized the importance of acknowledging this reality, stating:
“If we ignore these figures, we are essentially ‘burying our heads in the sand’ while significant capital either leaves the country or remains outside the documented economy.”
With an annual trading volume estimated between $200 billion and $300 billion, and total held assets ranging from $35 billion to $45 billion, the goal of current policy is to contain and channelize this existing trade into a documented framework. This allows the economy to benefit from blockchain technology in areas like payments and investments.
Achieving Financial Inclusion and Empowerment
By formalizing the financial system through digital assets, the government aims to bring unprecedented efficiency to the economy. The vision is a system where opening an account or making a payment is as simple as a click on a mobile device, ultimately empowering the “common man” to participate in modern trading.
To facilitate this, the government has launched the Pakistan Virtual Asset Regulatory Authority (PVARA). Established under the Virtual Assets Ordinance 2025, this authority provides a framework encompassing everything from digital exchanges and blockchain developers to Web 3.0 miners and companies specializing in real-world asset tokenization. Significant interest has already been seen from international players, particularly from the US and China, who view Pakistan as a fertile ground for these developments.
Balancing Oversight with Innovation
A primary challenge discussed during the FinFyreSide was the need to maintain regulatory oversight without stifling the “DNA” of the digital asset sector. Mr. Schehzad noted:
“The challenge lies in designing a licensing regime that maintains regulatory oversight without stifling innovation. We must ensure that the ‘DNA’ of digital asset providers, their agility and innovation is not compromised.”
This balanced approach is critical as Pakistan navigates high international scrutiny following its exit from the FATF gray list. The creation of PVARA is a positive step, but the “real work” involves a collaborative effort from the State Bank of Pakistan (SBP) and other stakeholders to ensure that innovation is nurtured and ambition is balanced with responsible oversight.
Supporting the SME Backbone
A parallel priority is ensuring that small and medium-sized enterprises (SMEs) have access to capital. SMEs represent 30% to 40% of Pakistan’s GDP and contribute billions to exports. The strategy is to build technology infrastructure while providing incentives and tax relief for new sectors. By replacing traditional land-based collateral with technology-driven financing, the government aims to provide the capital necessary for the “knowledge economy” to thrive.
Transitioning from Cash to Digital Payments
While Pakistan remains a high-cash economy, a visible shift is occurring at the grassroots level. Initiatives like “Raast“ by the State Bank of Pakistan (SBP) have been instrumental, and more transactions are occurring via mobile apps and ATMs. Mr. Schehzad noted that the government encourages the private sector to create user-friendly front-end interfaces that minimize costs, with the goal of making digital payments as “good as cash” while providing superior safety and security.
Central Bank Digital Currency (CBDC) and Stablecoins
The State Bank of Pakistan is currently working on the launch of its own stablecoin or Central Bank Digital Currency (CBDC). This is not a “shotgun approach”; rather, the SBP is carefully studying global models to avoid the potential downsides seen in other nations.
The priority is to ensure the system is robust and fully compliant with FATF standards. This is part of a larger national vision that includes a newly launched AI policy, designed to provide investors with the consistency and continuity they need to invest with confidence over the next decade.
Effective Regulation vs. Over-Regulation
PVARA focuses on three core functions: licensing, monitoring and surveillance, and compliance. Every exchange or miner entering Pakistan must pass a “fit and proper” test and meet minimum capital requirements.
“The government’s role is no longer to control everything or set prices, but to provide a level playing field where the private sector can lead while the state ensures compliance and protects the public.”
Taxation and the Future of the Tech Economy
In the 2025 budget, the government has begun shifting the “direction of travel” by providing relief slabs for the salaried class and lower tax rates (around 20-22%) for small companies. As digital finance helps document the informal economy, the government hopes to broaden the tax base and offer further relief to those already in the formal sector.
From “Jugaad” to Global Competitiveness
Pakistan’s greatest asset is its “street-smart” youth who have thrived in the informal or “jugaad” economy. Transforming this into a formal digital economy is the cornerstone of the nation’s future. Under a current three-year program with international funds, the state is committed to reducing cash circulation and maximizing financial transparency. The agenda is clear: promoting a “Digital Pakistan” that is technologically advanced, financially inclusive, and ready to lead in the digital assets space.
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