Stablecoins pegged to a single currency get their own dedicated provision under Pakistan’s Virtual Assets Act, 2026. Section 31 sets out six specific requirements an Issuer must meet before issuing what the Act calls a Fiat-Referenced Token — and the drafting leaves a deliberate gap at the end for the Authority to add more.
What is a Fiat-Referenced Token under the Act?
Section 3(1)(ix) defines a Fiat-Referenced Token as a Virtual Asset that purports to maintain a stable value relative to a single Official Currency of any country, and that is redeemable at par value by its issuer.
Section 3(1)(ix) states a Fiat-Referenced Token means:
a Virtual Asset that purports to maintain a stable value relative to a single Official Currency of any country and is redeemable at par value by its issuer.
Two features narrow this definition. It must reference a single currency — a token designed to track a basket of currencies does not fit this definition on its face, and would need to be assessed separately, potentially as an Asset-Referenced Token instead. And it must be redeemable “at par value” — a token that tracks a currency’s value but redeems at a floating or discounted rate does not meet this specific definition.
What are the six requirements section 31(1) imposes on a Fiat-Referenced Token issuer?
Section 31(1) lists six requirements, lettered (a) through (f), that any Issuer intending to issue a Fiat-Referenced Token in Pakistan must comply with.
Section 31(1) states an Issuer intending to issue a Fiat-Referenced Token in Pakistan shall comply with the following requirements:
(a) Hundred percent reserve backing, with High-Quality Liquid Assets (HQLA) or other assets as prescribed for fiat referenced token, held as a segregated reserve; (b) mechanisms for redemption at par value without undue delay; (c) audited reserve disclosures as prescribed by the Authority; (d) robust AML, CFT, CPF and sanctions compliance programs; (e) prioritized holder protections in insolvency; and (f) any other requirement prescribed by the Authority.
| Requirement | What it means in practice |
|---|---|
| (a) 100% HQLA reserve backing | Every unit in circulation must be backed one-to-one by High-Quality Liquid Assets or other prescribed assets, held as a Segregated Reserve |
| (b) Redemption at par without undue delay | Holders must be able to redeem at the pegged value, and the mechanism must operate promptly rather than merely existing on paper |
| (c) Audited reserve disclosures | Reserve backing must be independently verified and disclosed, in the form the Authority prescribes |
| (d) AML, CFT, CPF and sanctions compliance | The issuance programme must run robust anti-money laundering, counter-terrorist-financing, counter-proliferation-financing and sanctions controls |
| (e) Prioritized holder protections in insolvency | Token holders must rank ahead of ordinary creditors, or otherwise be protected, if the Issuer becomes insolvent |
| (f) Any other requirement prescribed | An open-ended power letting the Authority add further requirements by Regulations |
Requirement (f) is worth reading carefully alongside the other five. It signals that the six requirements listed are a floor, not a ceiling — the Authority retains the ability to layer additional obligations onto Fiat-Referenced Token issuance as it judges necessary, without needing to amend the Act itself.
What counts as “High-Quality Liquid Assets” for the reserve requirement?
The Act does not define the term within section 31 itself. Section 3(1)(x) defines HQLA only by reference forward to Regulations, stating it means “such high-quality liquid assets as may be prescribed by Regulations.” At the time of writing, no Regulations defining HQLA had been published, which means the precise composition of a compliant reserve — whether limited to government securities and cash, or drawn more broadly — is not yet settled by the source documents. Section 31(1)(a) also allows for “other assets as prescribed for fiat referenced token” alongside HQLA, suggesting the Authority may define a reserve-eligible asset list specific to Fiat-Referenced Tokens that is broader than HQLA alone.
What does “redemption without undue delay” require in practice?
Section 31(1)(b) does not fix a specific timeframe — it uses the qualitative standard “without undue delay” rather than a stated number of hours or days. This leaves the specific operational threshold to Regulations or to supervisory expectation, but the standard itself signals that redemption mechanisms built to work only in normal market conditions, with material slippage or queuing under stress, would sit uneasily with the statutory language. An Issuer should treat “without undue delay” as requiring redemption capacity that holds up under redemption pressure, not only under everyday, low-volume conditions — though the Act’s text does not specify a numeric benchmark.
How does section 31(2) allow requirements to differ between issuers?
Section 31(2) gives the Authority power to prescribe differentiated requirements based on an Issuer’s size, scope, complexity or risk profile, including expedited approval, stress testing, ongoing supervision, and consultation with the State Bank of Pakistan on reserve arrangements.
Section 31(2) states:
The Authority may prescribe differentiated requirements based on the size, scope, complexity, or risk profile of the Issuer, including, but not limited to, expedited approval, stress testing, ongoing supervision, and consultation with the State Bank of Pakistan on reserve arrangements.
The reference to consultation with the State Bank of Pakistan is notable. It signals that Fiat-Referenced Token issuance, particularly at scale, is not treated as a matter for PVARA alone — the Act contemplates the SBP’s involvement specifically on reserve arrangements, consistent with the SBP’s general mandate over currency and monetary stability. A larger issuance programme should expect this coordination to feature more heavily than a small-scale one, though the Act leaves the specific threshold for “larger” to Regulations.
How does this connect to the significant issuer regime under section 33?
An Issuer of a Fiat-Referenced Token that grows large enough — measured by size, scale, systemic importance, market impact, number of holders, or cross-border activity — may separately be classified as a Significant Issuer under section 33, triggering registration and enhanced reporting, disclosure, governance and risk-management requirements on top of the section 31 issuance requirements. The two regimes are not mutually exclusive: a Fiat-Referenced Token issuer meeting the section 31 requirements at launch could later cross the Significant Issuer threshold as its holder base and market impact grow, layering the enhanced section 33 obligations onto the ongoing section 31 obligations rather than replacing them.
What should an issuer preparing a Fiat-Referenced Token programme build now?
- design the reserve structure as a Segregated Reserve under section 3(1)(xxvi) from the outset, held separately from the Issuer’s own assets and structured so the Issuer’s creditors cannot claim it
- build redemption infrastructure capable of handling stress-level demand, not only ordinary-day volumes, given the “without undue delay” standard
- engage an approved audit function early for the section 31(1)(c) reserve disclosures, in parallel with the section 27 proof-of-reserves and annual audit obligations that apply to Licensees generally
- treat the AML, CFT, CPF and sanctions programme required by section 31(1)(d) as integrated with the Act’s broader Chapter 8 obligations, rather than a separate stablecoin-specific control set
- document insolvency-priority mechanics for holders under section 31(1)(e) in the Issuer’s constitutional or trust documents, since this protection needs to be legally enforceable, not merely stated in a whitepaper
- monitor for Regulations defining HQLA and setting the specific redemption-speed standard, since both remain open questions pending publication
Issuers building a Fiat-Referenced Token as part of a broader market entry strategy should treat the six section 31(1) requirements as the minimum design brief, with requirement (f) as a reminder that the brief is not yet final.
Related reading
- Stablecoin Issuance Under PVARA: Reserve Rules 2026
- PVARA Custody License: Safeguard Customer Crypto 2026
- Crypto Banking Pakistan: Banks That Open VASP Accounts
About this analysis
This analysis was prepared by the CoinConnect research desk from the Virtual Assets Act, 2026, read as published. Where practice is not yet settled or guidance has not been issued, that is stated in the text above.
Regulatory positions change and specific requirements should be verified against the current position published by the relevant authority before you act on them. This is information and analysis, not legal advice, and it does not create an advisory relationship. Take professional advice on your own circumstances.
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