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Pakistan and its Central Bank Plan on Banning Cryptocurrencies

Both the Pakistani Government and the Cental bank of the country seek to issue a ban on all cryptocurrencies.

Photo by twenty20photos / Envato

The Pakistani government and its Central Bank wish to ban cryptocurrencies as reported by the local media, also citing a document submitted to a provincial court.

In the document was compiled a committee headed up by Sima Kamil, who is the deputy governor of the State Bank of Pakistan (SBP). Other members consisted of representatives from the Ministry of Finance, as well as the Securities and Exchange Commission of Pakistan (SECP), and also the Federal Investigation Agency of Pakistan (FIA).

This submission marks the very first time that a clear position has been taken up by the Central Bank, according to the media reports on the matter. The government inclusion and regulatory representatives on the committee definitely give the report some additional authority as a reflection of some possible policy initiatives. Back in 2018, the SBP issued a circular that prohibited banks from dealing with any cryptocurrency exchanges.

“This indicates that, unlike in the past, this is a policy move which has greater consensus and coordination,” said Ali Farid Khwaja, who is a partner at the Oxford Frontier Capital and chairman of the KTrade KASB Securities, which is a stock brokerage in Karachi, the capital. “The SBP-led report has been accompanied with a coordinated crackdown on peer-to-peer network and illegal crypto operators by FIA and also warning letters issued by SECP.”

Earlier in the week, the FIA stated it would like to talk to Binance as part of an investigation into a possible suspected scam it said it cost several thousand investors more than $100 million.

The committee also submitted the report to the Sindh High Court, the hearing of which was about a case revolving around digital currencies and had its formation ordered. Also cited were concerns on the use of crypto for money laundering and financing terrorism.

Waqar Zaka was the one who brought the case. He serves as a TV host and crypto entrepreneur who wished the court to rule that cryptocurrencies be declared legal since a large number of Pakistanis expressed interest in them. The country definitely has the 3rd highest crypto adoption rate across the globe, per the Chainalysis Global Crypto Adoption Index.

Referred by the court was a 38-page report to the finance and law ministries for consideration. It ordered them to determine if a ban against crypto is constitutional, per a news report.

“The mindset if something is going wrong is to simply ban it,” uttered Majyd Aziz, who is the former president of the Karachi Chamber of Commerce and Industry. “Rather than trying to figure out the background, more often than not they go for a ban before going through the process. You can’t ban digital currencies.”

The government has also set up a different committee to take under consideration a regulatory approach following a call from the Financial Action Task Force (FATF), which serves as the global money-laundering watchdog. Pakistan has found itself on the organization’s gray list of countries since way back in 2018, which thereby hurt its ability to get international financial aid.

“I don’t think this means Pakistan has decided to ban it,” stated Faisal Aftab, a Zayn Capital co-founder. “I think they are still exploring regulation. The ambiguity is about whether Pakistan will consider cryptocurrencies as an asset. But it’s almost clear that it will not be considered a legal tender.”


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