Virtual Asset Derivatives Services Under Pakistan's Schedule I

Futures, options and swaps on Bitcoin or Ether are not a grey area under Pakistan’s new framework. They sit in Schedule I of the Virtual Assets Act, 2026 as their own licensable category, and they carry a second distinction that matters for anyone sequencing a market entry: derivatives is one of only four services a firm can offer under a No Objection Certificate, ahead of its full licence.

This article works through both points — what the Act actually licenses, and why the pre-licence route exists for this category specifically.

What are Virtual Asset Derivatives Services under Schedule I?

Item 6 of Schedule I defines the category as: “the offering, facilitation, execution, clearing, trading or arranging of transactions in derivatives (including futures, options, swaps, contracts for difference or other similar” instruments referencing virtual assets. The source text of the Schedule breaks off at “or other similar” before the next numbered item begins, so the closing words of the clause are not available to us. Readers should treat the illustrative list — futures, options, swaps, contracts for difference — as confirmed by the Act, and confirm the precise closing wording of item 6 directly with PVARA before relying on it for a legal opinion.

What is settled is the scope of the activity: any platform that offers, facilitates, executes, clears, trades, or arranges transactions in derivative instruments where a virtual asset is the underlying is providing a Virtual Asset Service under section 18, and needs a licence to do it in or from Pakistan.

Does the Act regulate all derivatives, or only virtual asset derivatives?

Only virtual asset derivatives. Section 2(2)(b) carves conventional derivatives out of the Act entirely, excluding “securities, derivatives, collective investment schemes, depositary receipts, or other traditional financial instruments that fall within the regulatory jurisdiction of the State Bank of Pakistan or the Securities and Exchange Commission of Pakistan.”

That exclusion sets a clean boundary in principle: a commodity futures contract regulated by SECP stays with SECP. A perpetual swap priced against a crypto index is a Schedule I service and falls to PVARA. In practice, the boundary will not always be obvious at the product level — a derivative referencing a tokenised real-world asset could touch both regimes depending on how it is structured. Section 9(1)(f) gives the Authority power to classify an asset or activity by its substance rather than its label, “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.” Any product that blends a traditional derivative structure with a virtual asset underlying should be classified with the Authority before launch, not after.

Why does derivatives sit in the AML-registered category before full licensing?

Because the PVARA No Objection Certificate Regulations 2025 name it as one of four services a firm may run under a No Objection Certificate, ahead of a full licence. Regulation 2.3 designates four VASP services as “non-financial businesses and professions” for AML registration purposes under the goAML system:

• Broker-Dealer Services;
• Custody Services;
• Exchange Services; and
• Virtual Asset Derivative Services.

Together these are called “AML Registered Services.” An applicant that receives its no objection certificate may register on the FMU’s goAML portal and begin offering these four services before its full licence application is decided, “subject to the conditions imposed by the Authority and until such time as the application for obtaining such license is finally determined.” Every other Schedule I service — advisory, lending, transfer and settlement, issuance, and the rest — has no such pre-licence route; it may only be offered after a full licence is granted.

Our reading is that these four were chosen because they carry the heaviest transaction-level money-laundering exposure and therefore need AML controls in place from day one, even before the Authority has finished assessing the wider application. That reading is not stated in the Regulations themselves; it is inference, not text.

What does an applicant need to unlock the derivatives NOC route?

The application path runs through Regulation 15 to 17 of the No Objection Certificate Regulations. In sequence:

1. Apply for the NOC using Form A1, disclosing the business model, controller structure, and Key Individuals, including a compliance officer and money-laundering reporting officer.
2. Have that application assessed within 60 calendar days (Regulation 17.1).
3. On approval, register the foreign entity on goAML, incorporate a local company under the Companies Act, 2017, and submit the full licensing application within three months of the licensing regulations being promulgated (Regulation 15.3).
4. Once goAML registration is complete, begin providing the AML Registered Services — including derivatives — under the conditions the Authority attaches.

Fitness and propriety of Controllers and Key Individuals is assessed as part of this NOC stage and may be re-evaluated at full licensing (Regulation 16.1). A firm planning to launch derivatives through this route should treat its fit and proper documentation as a single body of evidence carried through both stages, not two separate exercises.

What happens if you run derivatives without a licence or NOC?

Section 50 prohibits any unlicensed Virtual Asset Service in or from Pakistan. Section 54(1) sets the criminal penalty for wilfully providing one: imprisonment for up to five years, a fine of up to fifty million rupees, or both. Section 61 separately gives the Authority power to have unlicensed material — websites, apps, advertisements, payment links — removed or blocked at the request of telecom authorities, app stores, payment providers, and intermediaries. Offering leveraged crypto derivatives to Pakistani customers from an offshore platform without an NOC or licence sits squarely inside both provisions; the Act’s extraterritorial enforcement powers under section 4 are aimed precisely at that scenario.

What should a derivatives platform do before applying?

Three practical steps, in order:

• Confirm the classification early. If the product blends a traditional derivative wrapper with a virtual asset underlying, raise it with the Authority under section 9(1)(f) before building it, not after the NOC application is filed.
• Build the AML/CFT framework to the Regulation 8 standard from the outset, since anti-money laundering controls must be operational before AML-registered trading begins, not phased in afterwards.
• Plan capital and corporate setup on the assumption of a two-stage timeline — NOC and AML registration first, full licence second — rather than treating the NOC as the finish line.

Derivatives is a category the Act and its Regulations clearly intend to bring onshore quickly, given its place in the pre-licence AML group. That is also why it is a category PVARA is likely to watch closely once trading actually starts.

About this analysis

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