Not every licensing decision under the Virtual Assets Act 2026 is a straight grant-or-refuse choice. Section 21 gives the Pakistan Virtual Assets Regulatory Authority (PVARA) a third option — a provisional or limited-scope licence — alongside the standard grant and refusal outcomes for a full licence application. This is a narrower, more discretionary tool than it might sound, and the Act leaves much of how it works to be filled in later.
What are PVARA’s basic options on a licence application?
Section 21(1) sets out two outcomes for a licence application: “the Authority may— (a) grant a license, subject to such terms and conditions as it may deem appropriate; or (b) refuse the application, providing the applicant with written reasons for such refusal.” A grant can carry conditions PVARA considers appropriate; a refusal must come with written reasons. Neither branch is unconditional — a “grant” is not necessarily an unrestricted grant, and a refusal is not silent.
What is a provisional or limited-scope licence?
Section 21(2) adds a separate, discretionary power: “The Authority may, on a case-by-case basis, grant a provisional or a limited-scope license to an applicant, subject to such terms and conditions as may be prescribed.” This sits apart from the standard grant in section 21(1) — it is not a third category of the same decision, but an additional tool PVARA can choose to use instead of, or as a step toward, a full licence.
The Act uses two distinct terms here without defining either one:
- Provisional licence — the natural reading is a licence granted for a limited period or on a temporary basis, though the Act does not itself state a duration, a review trigger, or what happens when a provisional period ends.
- Limited-scope licence — the natural reading is a licence restricted to a subset of virtual asset services, or to a reduced scale of activity, though again the Act does not itself specify how that scope is defined or measured.
Both terms are left to be filled in “as may be prescribed,” meaning the operational detail sits in Regulations PVARA has not yet published in the source material reviewed for this analysis. Where a provision of the Act names a mechanism but leaves its terms to future Regulations, that gap should be stated rather than guessed at, and this is exactly that case.
On what basis would PVARA use this power?
The Act does not set eligibility criteria for a provisional or limited-scope licence within section 21(2) itself — it is framed as case-by-case discretion, not a rule-based entitlement. It does not say, for example, that a new market entrant, a smaller applicant, or a lower-risk service category would qualify. Any expectation that a provisional or limited-scope licence is available on request, or that it follows a predictable pattern, is not supported by the text of the Act as it stands, and should be checked directly with PVARA rather than assumed.
How is this different from PVARA’s regulatory sandbox?
It is easy to conflate a limited-scope licence with the regulatory sandbox, but the Act treats them as separate mechanisms in separate chapters.
| Feature | Provisional / limited-scope licence (s.21(2)) | Regulatory sandbox (s.35) |
|---|---|---|
| Legal nature | A licence, restricted in duration or scope | A controlled testing environment, not itself a licence |
| Statutory basis | Chapter 3, licensing of VASPs | Chapter 6, cybersecurity, sandbox and innovation |
| Who grants it | PVARA, case by case, on a licence application | PVARA, under sandbox eligibility and application procedures prescribed by Regulations |
| What it authorises | Specified virtual asset services, per the licence terms | Testing of innovative virtual asset products or services, potentially with no-objection or no-action statements |
A firm testing something genuinely novel is more likely to be looking at the sandbox route under section 35, which explicitly contemplates “controlled testing of innovative Virtual Asset products or services.” A firm seeking to operate a known, licensable service but on a restricted or time-limited basis is closer to what section 21(2) describes. The Act does not state that the two are mutually exclusive, nor does it describe one as a pathway into the other, and this analysis does not assume a formal link between them beyond what each section separately provides.
Does a related concept in the NOC Regulations shed any light on this?
PVARA’s No Objection Certificate Regulations 2025 describe a status it calls “AML-Registered Services” — a defined subset of services (Exchange, Broker-Dealer, Custody and Derivatives) that an applicant may provide once it has received a No-Objection Certificate and completed AML registration, ahead of obtaining a full licence. This is a useful point of comparison because it is also a restricted, interim form of authorisation to operate. It is not, however, the same mechanism as the provisional or limited-scope licence in section 21(2) of the Act — the Regulations describe it under the predecessor Ordinance’s numbering and frame it as a status tied to the AML registration process, not as an exercise of PVARA’s section 21(2) licensing discretion. This analysis treats the two as related in concept but distinct in legal basis, rather than assuming they are the same thing under different names.
Do the Act’s ongoing obligations still apply to a provisional or limited-scope licensee?
The Act does not carve out an exemption, and the plain reading of the surrounding sections is that they do. Section 22 opens with “A Licensee shall, at all times—” before listing minimum capital, periodic returns, risk-management systems and supervision fees, without distinguishing a provisional or limited-scope licensee from any other licensee. Section 23, which allows PVARA to vary, suspend or revoke a licence, likewise applies to “a license” generally rather than excluding provisional or limited-scope grants.
Our reading is that a provisional or limited-scope licence narrows what a business is authorised to do — the term or the range of permitted services — without narrowing what it has to comply with while holding that authorisation. The Act does not state this connection explicitly in relation to section 21(2), so it should be treated as our inference from reading sections 21, 22 and 23 together rather than a point the Act spells out on its own.
What should an applicant take from this?
A provisional or limited-scope licence is a real option under the Act, but it is discretionary, undefined in its detail, and not something an applicant can currently plan around with precision. An applicant considering the different licensing routes into Pakistan — full licence, provisional or limited-scope licence, sandbox, or an interim AML-registered status under separate Regulations — should raise the question directly with PVARA during the licence application process rather than assuming eligibility, since the Act leaves the terms and conditions attaching to a provisional or limited-scope licence entirely to future Regulations.
About this analysis
This analysis was prepared by the CoinConnect research desk from the Virtual Assets Act 2026 as passed by the National Assembly — principally section 21(1) and (2), with a comparison to section 35 — and from PVARA’s No Objection Certificate Regulations 2025, 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.
Entering Pakistan's crypto market?
CoinConnect handles market entry, partnerships, PR and launch for exchanges and Web3 companies moving into Pakistan and South Asia.
Visit CoinConnect