A business can choose its own name for a product. It cannot choose, by that name alone, which regulator gets to decide what the product actually is. Section 9(1)(f) of Pakistan’s Virtual Assets Act, 2026 gives PVARA a classification power built specifically to prevent naming and structuring choices from determining regulatory outcome — a provision worth understanding in detail before assuming a clever label keeps a product outside the Act’s reach.
What does section 9(1)(f) actually say?
The Authority’s classification function is defined in full as the power to “assess, determine, and classify any Virtual Asset, service, activity, offering, issuer, or service provider based on its substantive features, underlying function, method of use, or economic effect, irrespective of the nomenclature, structure, or designation assigned to it.” A qualifying clause follows: “Such classification may include, but is not limited to the determination of whether an asset is a Virtual Asset, whether a Person qualifies as a Virtual Asset Service Provider, or whether an offering constitutes a financial activity within the scope of this Act subject to consultation with the State Bank of Pakistan or the Securities and Exchange Commission of Pakistan where the asset exhibits characteristics falling within their respective mandates.”
Two things stand out in that wording. First, the scope is deliberately wide — it covers assets, services, activities, offerings, issuers and service providers, not just one category. Second, the test is explicitly substance-based: “substantive features, underlying function, method of use, or economic effect,” expressly regardless of “nomenclature, structure, or designation.”
What three specific determinations does the power name?
The text gives three named examples of what this classification power can settle, though it states these are illustrative rather than exhaustive (“may include, but is not limited to”):
- Whether an asset is a Virtual Asset. This decides whether a digital token falls within the Act’s scope at all, as opposed to being outside it under one of the exclusions in section 2, such as a closed-loop token or an excluded non-fungible token.
- Whether a Person qualifies as a Virtual Asset Service Provider. This decides whether a business offering some form of digital-asset-related service is, in substance, providing a Virtual Asset Service requiring a licence under section 18, regardless of how the business describes itself.
- Whether an offering constitutes a financial activity within the scope of this Act. This decides whether a fundraising or distribution mechanism is, in substance, an Initial Virtual Asset Offering or similar activity the Act regulates, rather than something else entirely.
Why does “irrespective of nomenclature” matter so much?
Because it closes the most obvious avoidance strategy available to a business trying to stay outside a new regulatory regime: renaming the product. A token marketed as a “loyalty point,” a “reward credit,” or a “utility credit” does not escape classification as a Virtual Asset simply by avoiding that phrase in its marketing — section 9(1)(f) directs PVARA to look at the asset’s substantive features, underlying function, method of use, and economic effect instead. The same applies to a business structured to look like a technology provider rather than a virtual asset service provider: if the substance of what it does matches a licensed category, the label on the corporate structure does not change the classification.
This substance-based approach is consistent with how the Act treats similar edge cases elsewhere. The closed-ecosystem token exclusion in section 2(2)(a), for example, is defined entirely by functional conditions — not usable outside a restricted platform, not convertible into other virtual assets, not tradable on any external market — rather than by what the issuer calls the token. Section 9(1)(f) generalises that same functional-test logic into a standing power the Authority can apply across any asset, service or business model, not just the closed-loop category.
When must PVARA consult another regulator before classifying something?
Where the asset in question genuinely overlaps with another regulator’s territory. The text requires consultation “with the State Bank of Pakistan or the Securities and Exchange Commission of Pakistan where the asset exhibits characteristics falling within their respective mandates.” This is a real constraint, not a courtesy — PVARA’s classification power is not exercised in a vacuum where a security-like instrument or a currency-like instrument is involved. The trigger for consultation is the asset’s characteristics, not a formal referral request from the other regulator, meaning PVARA itself bears the responsibility for recognising when consultation is required.
The Act does not specify, in the text reviewed for this piece, what form that consultation must take, how long it must last, or what happens if PVARA, the State Bank of Pakistan and the Securities and Exchange Commission of Pakistan disagree about how an asset should be classified. Those procedural details are not settled by section 9(1)(f) alone.
How does this power connect to PVARA’s other tools?
The classification function does not operate in isolation from the rest of section 9. Once PVARA determines that a product is, in substance, a Virtual Asset or that a business is, in substance, a service provider, the Authority’s other powers under section 9(2) become available against it — including the power to make Regulations giving effect to that classification, and the power to impose administrative sanctions where an unclassified or misclassified activity has been operating without the licence its true substance would require. Section 50 separately makes it a criminal offence to provide an unlicensed Virtual Asset Service, carrying a penalty of imprisonment up to five years or a fine up to fifty million rupees — a consequence that becomes directly relevant once a classification decision under section 9(1)(f) determines that a business’s activity was, in substance, a licensable service all along.
| Step | What happens |
|---|---|
| 1. Assessment | PVARA examines the asset, service, activity, offering, issuer or provider’s substantive features, underlying function, method of use, and economic effect |
| 2. Consultation (where triggered) | State Bank of Pakistan or Securities and Exchange Commission of Pakistan consulted if the asset exhibits characteristics within their mandates |
| 3. Determination | PVARA classifies the asset or activity based on substance, regardless of its name or structure |
| 4. Consequence | The classification determines whether licensing, Regulations, or enforcement powers under the rest of section 9 and the Act apply |
What should a business building a novel product take from this?
Three practical points follow directly from the text, without reading beyond it.
- A distinctive product name provides no protection on its own. The Act’s test is substance, not label — a token, service or offering will be assessed on what it actually does, and how it functions economically for the people who use it.
- Structuring around the licensing chapter carries the same risk as structuring around the definitions. Because the classification power extends to whether a Person “qualifies as a Virtual Asset Service Provider,” a corporate structure designed to avoid that label without changing the underlying activity is assessed the same way as a product designed to avoid the “Virtual Asset” label.
- Genuine overlap with securities or currency regulation triggers a real consultation duty, not just a PVARA decision. Where a product has characteristics that plausibly fall within the State Bank of Pakistan’s or the Securities and Exchange Commission of Pakistan’s mandate, that overlap is a reason to expect a longer, cross-regulator assessment rather than a fast, unilateral classification.
Businesses uncertain how their product would be classified are better served by seeking PVARA’s guidance directly, or applying for a no-objection certificate before launch, than by relying on naming or structuring choices to avoid classification altogether.
About this analysis
This analysis was prepared by the CoinConnect research desk from the Virtual Assets Act, 2026, the PVARA No Objection Certificate Regulations 2025, and the PVARA Sandbox Guidelines 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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