PayPal is currently banned in Pakistan due to several factors. The primary reasons are strict regulations by the State Bank of Pakistan (SBP), concerns about potential money laundering and terror financing, and Pakistan's status as a high-risk country according to PayPal's internal risk assessments.

Specifically, Pakistan's banking regulations do not allow the type of overdraft facilities that PayPal requires to operate. The government also has not put in place adequate laws and regulations related to cybercrime that PayPal demands before entering a new market. PayPal has strict anti-money laundering policies and sees Pakistan as a risky market for potential illicit transactions.

Additionally, Pakistan lacks a centralized credit history and scoring system that PayPal can access to evaluate users. There is no framework in place for PayPal to take legal action and press charges against fraudulent sellers in Pakistan. Finally, the Pakistani government has not negotiated effectively with PayPal to fulfill their demands, unlike some other high-risk countries like India and Bangladesh where PayPal now operates.

In summary, regulatory hurdles, risk of financial crimes, lack of cybercrime laws, underdeveloped credit systems, and inability to prosecute fraud have collectively led PayPal to ban operations in Pakistan until conditions improve.