Web Desk: Pakistan is preparing to bring cryptocurrency trading into the tax net by introducing a capital gains tax on digital asset transactions as part of the federal budget for fiscal year 2026-27, according to government officials and policy documents reviewed by local authorities.
The proposed measure follows consultations with the International Monetary Fund (IMF) and reflects broader efforts by the government to regulate a fast-growing digital asset market that has largely operated outside the country’s formal taxation system.
Authorities have finalised a proposal to broaden the scope of the Income Tax Ordinance, 2001, allowing profits earned from cryptocurrency trading to be taxed in a manner similar to gains from traditional financial assets.
Officials familiar with the discussions said the proposed tax rate could fall between 20% and 30%, although the final structure is expected to be announced when the federal budget is presented later this week.
In parallel, a high-level government committee has developed recommendations aimed at documenting cryptocurrency transactions and identifying previously unregistered market participants. The proposals seek to establish a framework that captures taxable income from digital assets while limiting the migration of investment capital away from conventional sectors of the economy.
The move comes as policymakers face increasing pressure to regulate Pakistan’s expanding cryptocurrency ecosystem.
According to a report submitted by the Federal Tax Ombudsman (FTO) to the Federal Board of Revenue (FBR), an estimated nine million Pakistanis are involved in cryptocurrency-related activities. The report said Pakistan ranks among the leading countries globally in terms of crypto adoption.
The FTO argued that a substantial volume of cryptocurrency transactions currently takes place beyond the reach of tax authorities, resulting in significant undocumented economic activity and forgone government revenue.
The report urged authorities to incorporate digital asset-related income, profits and holdings into a formal reporting and taxation framework, describing the sector as a potential source of additional tax receipts and a means of broadening the country’s tax base.
Pakistan has yet to establish a comprehensive legal framework governing digital assets.
In 2018, the State Bank of Pakistan (SBP) cautioned banks and financial institutions about the risks associated with virtual currencies and advised them against facilitating related transactions. However, the central bank stopped short of declaring cryptocurrencies illegal.
Since then, crypto-related activity has continued to grow, largely through offshore platforms and peer-to-peer networks that operate outside conventional banking channels.
As a result, authorities are now seeking to develop regulations that can bring greater transparency to the sector without stifling technological innovation.
While taxing profits from cryptocurrency trading is viewed as relatively straightforward, officials and industry experts acknowledge that other segments of the digital asset economy present more complicated challenges.
Activities such as cryptocurrency mining, staking, yield farming, decentralized finance (DeFi) transactions, non-fungible tokens (NFTs), and token offerings often involve digital assets rather than traditional currencies, making valuation and tax enforcement more difficult.
Many transactions also occur outside regulated financial institutions, creating additional hurdles for tax authorities attempting to track gains and verify ownership.
Experts involved in policy discussions have recommended formally classifying crypto assets as financial instruments under tax law and introducing clear rules for calculating gains and losses.
Under proposals currently being examined, taxable gains from cryptocurrency disposals would be calculated on a realized basis using the First-In, First-Out (FIFO) accounting method. Policymakers are also considering variable tax rates linked to holding periods, a structure designed to encourage longer-term investment while discouraging short-term speculative trading.
One of the most sensitive aspects of the proposed framework concerns undeclared cryptocurrency assets held abroad.
Tax specialists say many Pakistani investors turned to offshore exchanges or opened accounts using foreign addresses during years when no domestic regulatory framework existed.
Officials are now weighing options for bringing those assets into compliance without triggering widespread capital flight or encouraging investors to conceal holdings.
An overly aggressive enforcement approach could undermine the government’s objective of expanding the tax base. Instead, they say policymakers may need to provide a transitional mechanism that allows investors to declare previously undisclosed assets while ensuring future compliance.
The Ministry of Finance’s tax policy unit has confirmed that work on the framework is ongoing and that consultations with industry representatives, tax experts and other stakeholders continue.
As the government prepares to unveil its budget, officials face the challenge of balancing revenue generation with the need to foster innovation in a rapidly evolving digital economy.
The outcome could shape Pakistan’s approach to digital assets for years to come and determine how one of the country’s fastest-growing financial sectors is integrated into the formal economy.
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