Dr. Ikramul Haq & Abdul Rauf Shakoori
The Government of Pakistan has taken initial steps to recognize the reality that digital assets can no longer be ignored. The global rise of cryptocurrencies and the increasing volume of cross-border digital trade have pushed Islamabad to consider legal frameworks that could bring the sector out of the shadows. The State Bank of Pakistan (SBP) for years maintained strict prohibitions, but pressure from investors, remittance users, and international bodies has compelled a reconsideration.
The recent move to introduce crypto regulations signals the intent to regulate trading, exchanges, and digital asset service providers under a controlled regime rather than leaving the entire market uncheck and unregulated. The intent behind this approach is to balance innovation and investor protection with national security and financial stability.
The crypto law, Virtual Assets Ordinance, 2025 as introduced, lays out the legal recognition of digital assets as a category separate from legal tender but tradable under licensed entities. The promise of the law is to open a regulated environment that attracts investment and reduces capital flight through informal channels. The challenge, however, lies not only in passing the legislation but also in enforcing it across a fragmented financial ecosystem where underground operators already thrive.
The Pakistan road to regulating cryptocurrency is a full of challenges based on the current legal and monitoring and regulatory framework. The regulatory agencies have limited technical expertise in blockchain analytics, and without robust capacity building, enforcement may remain weak. The political climate also makes consistent policymaking difficult, as frequent shifts in government priorities often delay implementation.
The informal economy in Pakistan is large, and public trust in institutions is low, which can drive many investors toward unregulated platforms regardless of the risks. The global volatility of cryptocurrencies further complicates matters, as a sudden crash could expose retail investors to massive losses and create pressure on regulators to intervene.
The international dimension is also critical, since compliance with Financial Action Task Force (FATF) guidelines is necessary to avoid sanctions, and weak oversight in crypto could undermine Pakistan’s progress on its anti-money laundering commitments. Pakistan faces significant challenges in regulating cryptocurrency due to its current legal and regulatory framework.
The international experience shows that regulation without vigilance can create new avenues for fraud. The United States Department of the Treasury’s Financial Crimes Enforcement Network recently issued an advisory warning about the rise of convertible virtual currency kiosks, commonly referred to as crypto ATMs, being exploited for scams.
The advisory reported that in 2024 alone, more than ten thousand complaints were lodged regarding scams conducted through such kiosks, with losses approaching a quarter of a billion dollars. The advisory highlighted that scammers prefer kiosks because they provide quick access to digital assets, often with minimal oversight, and because transactions made through them are difficult to reverse. The relevance for Pakistan is obvious: if regulation does not anticipate such loopholes, similar scams will almost certainly proliferate once digital assets are legalized.
The FinCEN advisory describes in detail how kiosks function and how criminals exploit them. The kiosks allow anyone to insert cash or swipe a card and receive cryptocurrency in a digital wallet, sometimes without stringent identification. Scammers typically contact victims through phone calls, emails, or pop-up messages on computers, convincing them that their bank accounts are compromised or that they must pay urgent fees.
The victims are then instructed step by step to withdraw cash, locate a nearby kiosk, scan a QR code provided by the scammer, and deposit the money. The funds immediately transfer into the criminal’s wallet, often then routed through multiple wallets or converted into stablecoins to avoid detection. The simplicity of the process, combined with the lack of reversal mechanisms, makes kiosks an ideal instrument for fraudsters.
The advisory outlines how elder fraud has become a central concern, with individuals above sixty years old being disproportionately victimized. The Federal Trade Commission in the United States found that more than two of every three dollars lost in kiosk fraud came from older adults. The scams include romance frauds, government impersonation, tech support hoaxes, and emergency calls demanding urgent payments. Victims are often kept on the phone while they walk to the kiosk and complete the transactions, ensuring the criminals maintain control over the process.
The red flag indicators documented by FinCEN reveal that victims are frequently instructed to make multiple small transactions across different kiosks, a tactic known as smurfing, to avoid triggering compliance alerts. The lesson for Pakistan is that any move toward introducing crypto kiosks must be accompanied by strict controls and public awareness campaigns.
The schemes of fraud associated with cryptocurrencies are not limited to kiosks. The FinCEN documents also highlight investment scams, pig-butchering schemes, and laundering through decentralized finance channels.
Investment scams involve promises of extraordinary returns through platforms that mimic legitimate exchanges but collapse once deposits are made. Pig-butchering scams involve criminals building long-term trust with victims through social media or dating platforms before eventually luring them into fraudulent crypto investments.
Decentralized finance laundering, particularly through chain-hopping across different blockchains, makes tracking funds far more difficult. These patterns demonstrate that fraudsters continuously adapt their methods, and without strong intelligence sharing and compliance mechanisms, regulators cannot keep pace.
The Pakistani context makes these challenges sharper. The public’s limited understanding of digital assets leaves them vulnerable to promises of quick profits. The country’s high youth population is digitally connected but financially inexperienced, making them prime targets for online scams. The diaspora remittance market, which is among the largest in the world, could also be infiltrated by scammers who exploit the need for fast and cheap cross-border transfers.
The kiosks, if introduced, may be placed in convenience stores or public spaces with little monitoring, providing criminals with the same opportunities identified in the FinCEN advisory. The possibility of criminal organizations using kiosks to launder drug proceeds or finance terrorism adds another layer of national security risk.
The legal framework in Pakistan will need to ensure that all service providers are registered, monitored, and required to implement robust anti-money laundering programmes. The experience of the United States shows that even in a highly resourced system, non-compliant kiosk operators flourish, with many failing to register with regulators or deliberately providing false information to banks.
In Pakistan, where institutional oversight is weaker, the risk of widespread non-compliance is even higher. If kiosk operators are not strictly regulated, they can easily become channels for unlicensed money transmission, enabling both petty fraud and organized crime. The enforcement mechanism must therefore include not only registration but also active monitoring, transaction reporting, and strong penalties for violations.
The FinCEN case studies further illustrate the real-world dangers. One case involved a man sentenced for operating an illegal kiosk network that laundered millions of dollars in Bitcoin and cash for criminals, charging exorbitant fees while deliberately ignoring anti-money laundering obligations. Another case involved a seventy-year-old retiree in California who was tricked into depositing over a million dollars through kiosks and even sending gold bars, believing she was protecting her assets.
These stories underline how victims can lose their life savings within days and how kiosks provide a convenient infrastructure for criminals. For Pakistan, which has a large population of elderly individuals with retirement savings often held in insecure channels, the parallels are alarming.
The regulatory approach must also anticipate cross-border dynamics. Criminals rarely operate within a single jurisdiction, and funds can move across exchanges in different countries within minutes. The FinCEN notice emphasizes the importance of suspicious activity reporting, information sharing among institutions, and compliance with the Bank Secrecy Act.
For Pakistan, integration with international monitoring bodies and adoption of blockchain analytics tools will be essential. The law must not only establish domestic compliance requirements but also build channels for cooperation with foreign regulators, so that illicit funds moving in or out of Pakistan can be tracked and frozen. Without this, criminals will exploit jurisdictional gaps.
The final concern relates to public trust and awareness. The advisory makes clear that most scams begin with basic social engineering—phone calls, emails, or online ads. In Pakistan, where public awareness of digital security is low, educational campaigns will be crucial.
The law alone cannot protect citizens if they are unaware of how scams operate. Financial literacy programmes, mandatory warnings on kiosks, and partnerships with telecom providers to block scam communications may all be needed. The integration of consumer protection into the crypto law is therefore as important as the technical regulatory provisions.
The broader lesson from the FinCEN advisory is that technology designed for convenience can quickly become a vehicle for exploitation when regulation lags criminal innovation. The Pakistani government’s intention to bring cryptocurrencies under a legal framework is a positive step, but it will require foresight, investment in monitoring capacity, and a willingness to learn from international experience.
The crypto law cannot be limited to taxation and registration; it must anticipate fraud schemes, impose strict compliance on service providers, and empower regulators to respond swiftly. The cost of failure will be borne by ordinary citizens who may lose their savings to fraudsters, and by the country’s financial system which could face reputational and security risks.
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Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, media, environment, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He holds LLD in tax laws with specialization in transfer pricing.
He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner. He studied journalism, English literature and law.
He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal).
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 3000 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
X (formerly Twitter): DrIkramulHaq
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.
His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
X (formerly Twitter): Adbul Rauf Shakoori
The recent publication, coauthored by these writes with Huzaima Bukhari is
Pakistan Tackling FATF: Challenges & Solutions, available at:
https://aacp.com.pk/book-detail/pakistan-tackling-fatf-challenges-and-solutions-35
https://www.amazon.com/dp/B08RXH8W46