Unauthorised Token Offerings and Their Consequences

Launching a token sale to the Pakistani public without going through the Act’s approval process is not a grey area under the Virtual Assets Act, 2026 — it is a specifically named prohibition with its own criminal penalty. Section 51 targets the Initial Virtual Asset Offering, or IVAO, directly, and section 54(2) attaches a penalty that sits below the harshest tier in the Act’s enforcement chapter but is still serious enough to change the economics of trying to raise funds this way without authorisation.

Founders considering a token launch aimed at Pakistani investors, and platforms considering hosting or promoting one, both need to understand where the line sits — because the prohibition catches the act of conducting the offering itself, independent of whether the underlying project later turns out to be legitimate.

What is an Initial Virtual Asset Offering under the Act?

Section 3(1)(xiv) defines it as:

“a method of raising funds by an Issuer through the public offering of Virtual Assets in exchange for funds or other Virtual Assets or anything of commercial value, subject to the limitations and disclosure requirements Prescribed under this Act.”

Three elements matter in that definition. First, it is a public offering — not a private placement to a small, defined group, though the Act does not draw a bright line here itself. Second, the consideration received can be funds, other virtual assets, or “anything of commercial value,” which is broad enough to catch barter-style or non-cash token sales, not only cash raises. Third, and most importantly for section 51, the definition is explicitly “subject to the limitations and disclosure requirements Prescribed under this Act” — meaning an IVAO is, by its own statutory definition, something that only exists lawfully within the Act’s approval framework.

What does section 51 actually prohibit?

Section 51 states:

“No Person shall conduct or purport to conduct an Initial Virtual Asset Offering in or from Pakistan, except in accordance with this Act and the Rules or Regulations made thereunder.”

Two things stand out in that wording. “Conduct or purport to conduct” reaches not only a completed, successful offering but an attempt or a claimed offering — a project publicly announcing and beginning a token sale is within scope even before it raises a single rupee. And “in accordance with this Act and the Rules or Regulations made thereunder” ties lawful conduct of an IVAO to compliance with a framework that is only partly built out in the Act’s own text.

What does the Act require for an IVAO to be lawful?

Section 30 sets the eligibility gate: “Only legal entities, as registered in Pakistan and meeting the eligibility criteria prescribed by Regulations shall be permitted to conduct an Initial Virtual Asset Offering.” That immediately rules out an unincorporated founder team or a purely offshore entity running a token sale aimed at Pakistani investors — the entity must be Pakistani-registered from the outset. Section 30(2) then hands PVARA the power to prescribe “the conditions, disclosure requirements, approval processes and ongoing obligations applicable to Initial Virtual Asset Offerings” by Regulations.

Section 42(1) adds a further, related obligation for any issuer offering a virtual asset to the public: publishing a whitepaper “in such form and manner as may be prescribed by Regulations.” Where no Regulations under sections 30(2) or 42(1) have yet been issued, a founder cannot point to a completed, published approval process to follow — which in practice means no IVAO can currently be conducted “in accordance with this Act and the Rules or Regulations made thereunder,” because that accompanying framework is not yet fully in place. Our reading is that this leaves section 51’s prohibition operating, for now, as close to an outright bar on public token offerings in Pakistan, pending the Regulations that would give a compliant path any practical content.

How is an unauthorised IVAO different from simply providing an unlicensed virtual asset service?

The two prohibitions sit next to each other in the Act’s structure but target different conduct. Section 50(1), discussed in a companion piece on this site, bars operating a virtual asset service provider business — an exchange, a custodian, a broker-dealer — without both Pakistani incorporation and a PVARA licence. Section 51 targets a narrower and more specific act: raising funds through a public token offering. A project could, in principle, breach section 51 without ever operating an ongoing exchange or custody business at all — a single unauthorised token sale is enough to engage the prohibition, whether or not the issuer goes on to run any other virtual asset service afterwards.

Prohibition	What it targets	Penalty section	Maximum exposure
Section 50(1)	Operating a VASP business without incorporation + licence	Section 54(1)	5 years’ imprisonment, or fine up to Rs 50 million, or both
Section 51	Conducting an unauthorised Initial Virtual Asset Offering	Section 54(2)	3 years’ imprisonment, or fine up to Rs 25 million, or both

What is the penalty for breaching section 51?

Section 54(2) states:

“Whoever conducts an Initial Virtual Asset Offering in contravention of this Act, Rules and Regulations shall be punishable with imprisonment for a term up to three years, or with fine up to twenty-five million Rupees or with both.”

The penalty is lower than section 54(1)’s exposure for unlicensed virtual asset services, but it is not trivial, and it applies to “whoever conducts” the offering — language broad enough to reach the founders, promoters, and, depending on the facts, potentially the platform hosting the sale, though the Act does not spell out platform liability for this specific offence in the way section 61(2) does for online material connected to unlicensed services generally.

Section 55 extends liability to individuals behind a corporate structure: where the offence is committed by a body corporate “with the consent, connivance or neglect of any director, manager, secretary or similar officer, such Person shall be deemed to have committed the offence.” A director who signs off on or turns a blind eye to an unauthorised token sale carries personal exposure alongside the company.

Does PVARA have any tools short of criminal prosecution to stop an unauthorised IVAO?

Yes. Section 61(1) allows PVARA to “remove, block, or direct the removal or blocking of any online material… if, on reasonable grounds, it promotes, operates, or relates to an unlicensed Virtual Asset Service or contravenes this Act, its Rules, or Regulations.” An unauthorised token offering, being a contravention of section 51, falls within that power’s reach, and section 61(2) lets PVARA direct that action at hosting providers, payment providers and advertising networks carrying the offering’s promotional material, not only the issuer itself.

Separately, section 59(1)’s administrative sanctions — reprimand, directive to cease, financial penalty, or disqualification from a position of responsibility — apply “where the Authority is satisfied that a Person has contravened any provision of this Act,” language broad enough to cover an unauthorised IVAO alongside, or instead of, criminal prosecution. Section 60 also gives PVARA emergency intervention powers to suspend specified virtual asset services or freeze related assets for up to thirty days where there is a systemic threat, fraud, or serious risk to customers — a tool that could plausibly be used against an active, ongoing token sale suspected of being unauthorised, pending a fuller investigation.

What should a founder or platform do before launching or hosting a token offering aimed at Pakistani investors?

Given how much of the section 51 compliance path still depends on Regulations that had not been issued in the material reviewed here, the practical steps available today are narrower than a founder might hope for:

• Confirm Pakistani registration status of the issuing entity first, since section 30(1) makes this a threshold requirement independent of anything else.
• Do not treat a foreign token sale’s legal status in another jurisdiction as relevant to Pakistani legality, since section 51’s prohibition is framed around conduct “in or from Pakistan,” not around the issuer’s compliance status elsewhere.
• Assume no compliant IVAO path currently exists in practice until PVARA publishes the section 30(2) and section 42(1) Regulations, rather than proceeding on the basis that “no Regulations yet” means “no restriction yet” — section 51’s prohibition is already in force even where the compliant route it references is not yet fully built out.
• Treat platform hosting or promotion of a token sale aimed at Pakistani investors as carrying its own exposure, given section 61(2)’s reach into hosting and advertising infrastructure, even where the platform is not itself the issuer.

Related reading

• PVARA Exchange License: Capital, Rules & Obligations 2026
• PVARA Transfer & Settlement License: Crypto Payments 2026
• PVARA Licensing Process: NOC to Full Licence, Step by Step

About this analysis

This analysis was prepared by the CoinConnect research desk from the Virtual Assets Act, 2026 as passed by the National Assembly, 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.