The federal government is likely to tax and document cryptocurrency transactions in the upcoming budget, sources said, describing the move as a major challenge.

The government is working on several proposals to finalise a taxation framework aimed at ensuring proper documentation and encouraging investment. A key institutional challenge, officials said, is the return of crypto assets held abroad.

The Federal Board of Revenue (FBR) is reviewing the taxation of digital currency transactions, including profits and assets.

According to a report by the Federal Tax Ombudsman, there are 560 million digital currency users worldwide, with 90 million in Pakistan, making the country the sixth largest adopter of cryptocurrency globally.

The State Bank of Pakistan issued a circular in April 2018 outlining the risks of virtual currencies, but did not declare them illegal.