The Four Levers Behind VASP Capital Rules in Pakistan

Section 25 of the Virtual Assets Act, 2026 does not set a rupee figure for how much capital a virtual asset service provider needs to hold. What it sets instead is a structure — a baseline duty and three separate powers the Authority can use to adjust that duty up, add conditions to it, or waive it, depending on what kind of firm it is regulating.

Understanding that structure matters more than waiting for a number to appear. A firm that grasps how the four levers in section 25 fit together can build a capital plan that survives whatever figure the Authority eventually publishes in Regulations, because the plan is built around the right variables — risk profile, scope of licence, and liquidity of the specific business — rather than around a guess at a single threshold.

What is the baseline capital duty under section 25(1)?

Section 25(1) requires every Licensee to maintain, at all times, minimum paid-up capital, liquid assets and financial resources not less than the amounts prescribed by the Authority. It is a standing obligation, not a one-time test passed at the point of licensing.

The text reads:

A Licensee shall, at all times, maintain such minimum paid-up capital, liquid assets and financial resources not less than such amounts as may be prescribed.

The phrase “at all times” is doing real work here. It means a firm that meets the capital requirement on the day its licence is granted and then lets its resources drift below the floor is in breach of section 25(1) from the moment it crosses that line, not merely at its next reporting date. Section 22(a) restates this as one of the ongoing obligations every Licensee carries: to maintain “the prescribed minimum paid-up capital and financial resources” continuously, alongside the other duties listed in that section — periodic reporting, prior approval for material changes in control or business, and risk-management systems among them.

The duty covers three distinct things, not one number: paid-up capital (money actually contributed by shareholders, as opposed to authorised but uncalled capital), liquid assets, and financial resources more broadly. The Act leaves the definition of what counts as “liquid” to Regulations, though section 3(1)(x) signals the concept is linked to High-Quality Liquid Assets, itself left entirely to Regulations to define.

What is PVARA’s uplift power under section 25(2)?

Section 25(2) allows the Authority, having regard to a Licensee’s category, size, complexity or risk profile, to prescribe higher financial-resource requirements than the baseline. This is the mechanism that lets the regime be risk-differentiated rather than one-size-fits-all.

In practice, this means two firms holding the same class of licence could face different capital floors if their risk profiles differ — a custodian holding large customer balances against a purely advisory firm that never takes possession of customer assets, for example. Schedule I’s ten licence categories referenced in section 18 give the Authority a natural axis to differentiate along: category 3, Custody and Administration Services, carries a materially different risk profile from category 1, Advisory Services, because one involves holding customer assets and the other does not.

Section 25(2) does not specify the criteria the Authority must weigh beyond category, size, complexity and risk profile — it leaves the calibration itself to the Authority’s judgement, exercised through Regulations. Applicants choosing which Schedule I category to apply under should treat that choice as a direct input into their eventual capital exposure, not a purely operational decision made independently of the finance function.

What can PVARA add through section 25(3)?

Section 25(3) allows the Authority to prescribe, by Regulations, additional liquidity, margin, risk-based capital or reserve requirements, having regard to the risks posed by a Licensee’s activities. Where section 25(2) is about raising the baseline capital number itself, section 25(3) is about layering different kinds of requirement on top of, or alongside, that baseline.

The four categories named — liquidity, margin, risk-based capital, and reserve requirements — map onto different risk exposures a Licensee’s activities can create. A firm offering derivatives or leveraged products, for instance, creates margin risk that a pure spot exchange does not. A firm engaged in lending creates credit and liquidity risk distinct from a custody-only business. Section 25(3) is the hook that lets the Authority attach requirements specific to the activity, rather than forcing every risk into a single capital number under section 25(1) or 25(2).

None of the specific thresholds, formulas or eligible instruments for these add-on requirements had been published in Regulations at the time of writing. Firms operating in higher-risk categories — derivatives, lending, or discretionary investment services among them — should expect this is where sector-specific capital rules are most likely to land once Regulations are issued, and should build financial models that can absorb an add-on requirement rather than assuming section 25(1)’s baseline figure will be the only number that applies to them.

When can a Licensee qualify for an exemption under section 25(4)?

Section 25(4) allows the Authority, in the manner prescribed by Regulations, to grant conditional or risk-based exemptions from the section 25 requirements for limited-scope or low-risk Licensees. This is the counterweight to sections 25(2) and 25(3): where those provisions let the Authority raise the bar for higher-risk firms, section 25(4) lets it lower the bar for firms that pose less risk by design.

Two qualifying concepts do the work here — “limited-scope” and “low-risk”. Neither is defined in the Act itself. A limited-scope Licensee is most naturally read against section 21(2), which separately allows the Authority to grant a provisional or limited-scope licence restricting the services a firm may provide. A firm licensed only for a narrow slice of Schedule I services — advisory only, for example, with no custody, no market-making and no discretion over customer assets — presents an inherently smaller capital-at-risk profile than a full-service exchange, and is the kind of firm section 25(4) appears designed to accommodate.

Any exemption under section 25(4) is explicitly conditional and risk-based, not unconditional. Our reading is that a Licensee should not treat an exemption as a permanent status independent of its actual risk profile — if a firm granted an exemption later expands into higher-risk activities such as custody or lending, the basis for the exemption would presumably fall away, and section 22(d) already requires prior Authority approval for any material change in a Licensee’s business.

How does section 25 interact with the sandbox and NOC stages?

Section 35 establishes a regulatory sandbox for controlled testing of innovative products, with eligibility, risk limits and duration left to Regulations under section 35(2). Section 25 itself binds a “Licensee” as defined in section 3(1)(xvi) — a person who holds a licence — so its capital floor attaches once a licence is granted, not automatically at the earlier no objection certificate stage. That said, the Authority still assesses financial soundness before that point: the NOC application already requires audited financial statements or pro forma financials, evidence of paid-up capital, and a description of how initial funding was sourced, so an applicant’s capital story is under scrutiny well before section 25’s continuing duty formally attaches.

The practical reading is that section 25(4)’s exemption route and the sandbox under section 35 serve related but distinct purposes: the sandbox is about testing a product under supervision before committing to full licensing, while a section 25(4) exemption is about a Licensee’s ongoing capital burden once licensed, calibrated to how limited or low-risk its licensed activity actually is. A firm entering through the sandbox should not assume that route automatically carries a reduced capital requirement once it exits into full licensing — that determination sits with section 25(4) and whatever conditions the Authority attaches to it.

What should a Licensee do before the capital Regulations are published?

Waiting is not a strategy, because the fit-and-proper and financial-soundness assessments at the NOC stage already test whether an applicant’s capital is real and traceable, independent of whether a specific threshold number exists yet. Building the underlying financial discipline early positions a firm to absorb whichever of the four levers ends up applying to it.

Practical steps worth taking now:

• decide which Schedule I category, or combination of categories, the business will apply under, since that choice drives exposure to the section 25(2) uplift
• model the business against each of the section 25(3) categories — liquidity, margin, risk-based capital, reserves — to identify which are most likely to apply given the firm’s actual activities
• assess honestly whether the business is genuinely limited-scope or low-risk enough to make a section 25(4) exemption a realistic ask, rather than assuming eligibility
• keep audited financial statements, or credible pro forma financials if newly incorporated, current and ready, since these are already required at the application stage regardless of what the eventual capital number turns out to be
• separate capital planning from reserve planning for any Issuer activity, since sections 31 and 32 impose their own, fully distinct backing requirements on Fiat-Referenced and Asset-Referenced Tokens that do not substitute for a service provider’s own capital under section 25

Firms working through their corporate setup should treat section 25 as four separate design questions, not one number to solve for, because that is how the statute itself is structured.

About this analysis

This analysis was prepared by the CoinConnect research desk from the Virtual Assets Act, 2026 and the PVARA No Objection Certificate Regulations, 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.