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Govt, SBP recommend complete ban on cryptocurrencies

SHC also urged to impose penalties over "unauthorized operations"

SAMAA | - Posted: Jan 12, 2022 | Last Updated: 4 days ago
Posted: Jan 12, 2022 | Last Updated: 4 days ago

Photo: AFP

The State Bank of Pakistan and the federal government have decided to ban the use of all cryptocurrencies, according to a report submitted to the Sindh High Court (SHC) on Wednesday.

The SHC has been hearing a case about digital currencies.

For the first time, the central bank has taken a clear position on the cryptocurrencies and urged the SHC to not only ban cryptocurrencies but also impose penalties against crypto exchanges.

The status of cryptocurrencies in Pakistan has been in limbo in the absence of laws and rules to regulate the use of these digital currencies for trade.

On October 20, the Sindh High Court told the federal government to regulate cryptocurrencies within three months. The court directed the government to form a committee headed by the federal secretary of finance to determine the legal status of cryptocurrencies.

The court had instructed the authorities to come up with a report on the use of cryptocurrencies. The report was submitted to the Sindh High Court on Wednesday.

The report said that cryptocurrency is illegal and could not be used for trade.

The report names at least eleven countries including China and Saudi Arabia that have banned cryptocurrencies.

The report also refers to the recent investigation by the FIA against crypto exchanges such as Binance and OctaFx and the risk these exchanges posed for the investors.

The Sindh High Court has ordered that the report be sent to the finance and law ministries for a final decision on the legal status of the cryptocurrencies.

The law and finance ministries will determine if a ban against cryptocurrencies would be within the ambit of the Constitution. The would also work out a legal framework.

A two-member bench headed by Justice Karim Khan Agha heard the case.

SBP Deputy Governor Seema Kamil submitted the 38-page report recommending that cryptocurrencies be declared illegal.

The report says that cryptocurrency is a virtual business that could be used to finance acts of terrorism and to launder money.

An important question was raised during the hearing: What would be the status of cryptocurrencies in the intervening months before a final decision is made.

The court said that the Federal Investigation Agency (FIA) and other agencies would continue to act according to their rules.

It urged the court to ban the “unauthorized operations” of cryptocurrency exchanges and impose penalties against them “as some other countries have done.”

Petitioner Waqar Zaka pleaded with the court that cryptocurrencies be declared legal as a large number of Pakistanis were interested in them.

The court will next hear the case on April 12.

State Bank of Pakistan takes a clear position

The report submitted to the Sindh High Court indicates a clear position taken by the central bank for the first time.

In April 2021, SBP Governor Raza Baqir had said the central bank is studying cryptocurrencies and their potential for bringing transactions happening off the books into a regulatory framework.

In an interview with CNN’s Julia Chatterley, he said, “We are studying that [Central Bank Digital Currency] very carefully.”

He said that it will not only boost the central bank’s efforts for financial inclusion but also allow it to make progress in its fight towards anti-money laundering and countering terrorism financing.

However, before this key statement, the central bank had prohibited the transactions in digital currencies and declared them ‘illegal tender’.

In a circular issued to banks in 2018, SBP warned the banks that virtual currencies like Bitcoins, Lite Coin, Pakcoin, etc. are not legal tender issued or guaranteed by the Government of Pakistan.

The circular also said the SBP has not allowed any individual or entity to issue, sell, purchase and exchange virtual currencies.

The central bank directed the banks to refrain from trading, holding and investing in such currencies, and to report any such transactions to the Financial Monitoring Unit of the central bank.

High stakes

Cryptocurrencies have attracted thousands of investors from Pakistan and they have reportedly invested $20 billion in digital currencies, according to Federation of Pakistan Chambers of Commerce and Industry President Nasir Hayat Magoon.

In December 2021, thousands of online investors in Pakistan lost Rs1 billion to a crypto scam in an attempt to make a quick buck.

The scam sparked an FIA investigation against Binance, whose wallet had been used to transfer funds to scammers.

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  1. Aamir khan  January 12, 2022 8:15 pm/ Reply

    Wah wah apni news ke rating kay ley headline bohat achi lagai hai banned nhi kara abi 12 april ke date di hai aap log apna part dal kar is ko regulat karwa saktay hai future hai ya par aap log galat news chalay gay

  2. Muhammad Ahmed  January 13, 2022 3:33 am/ Reply

    Media is very powerful. Media can contribute highly towards the regulation of cryptocurrency but these types of news and articles will eventually result in Pakistan again going a decade behind the world. The world is accepting cryptocurrency as a legal tender and not even the european countries but India too where they have their own exchange etc. Media should take responsibility and instead of printing against cryptocurrency, they should print in favour.

  3. Hassan  January 13, 2022 3:57 pm/ Reply

    Just like we lost the Internet companies race and YouTube content race, will we let these goons repeat the mistake in this next technological evolution?

  4. A Pakistani  January 13, 2022 7:38 pm/ Reply

    Insane decision from govt of Pakistan and SBP. SBP is against crypto because it is against their monopoly and interest. Govt is against crypto because of imf and fatf.
    SBP argument is it is used for money laundering and terror finance. But the question raised is; is it the only way to do that? Hawala hundi is still the main source of money laundering and terror financing.

    Imran khan said we are heading toward digital Pakistan. He proved wrong again as govt rapidly winding up every single opportunity from youth and people of Pakistan to earn from any platform. Amazon, metaverse, exchanges, etc etc

    Weldone Imran Khan and Co.

  5. Rizwan  January 14, 2022 4:34 pm/ Reply

    clearly they don’t know what they are talking about. In USA and other Europian countries crypto is legalized. There are regulated crypto exchanges and banking apps, beauti of blockchain is in its transparecny as all transactions can be viwed by anyone. ( Monero and zcash can be considered as an exception here. But can easily of blocked by exchanges if they comply with said country Laws)

    For terror financing people need reality check.. majority of the crime and terror financing was and is still done using convention paper money ..crypto is only around for 10 years or so before that entire world was very peacefull there were no crime or terror funding cases?

    Like all other tech we will eventually accept it and legalized it in Pakistan but this will be done after entire world has moved on and capture the large portion of market share then the so called bright minds will wakeup and realized what they have missed.

  6. Khurram Shahzad  January 14, 2022 7:31 pm/ Reply

    Shameful decision made by SBP and Central board of Revenue. In spite of appreciating such initiatives, the Paralysed Gov is raising hurdles against Crypto. Actually aristocracy never wanted the down trodden to flourish. They are afraid of losing there so called fudalistic stature. Also the private banks have started trembling as they would be vanished if Crypto rules so these goons are expressing their concern through SBP.
    As far as PTI is concerned it has been proved unto the day that this is the most inefficient gov in the entire history of Pakistan. So to expect any good from these dumbs is total waste.

  7. Pak  January 14, 2022 9:41 pm/ Reply

    The situation is; one has a tooth ache, instead of curing it, remove the tooth. Like seriously.
    Some 20 years later, Pak govt may form a structure for crypto and declare it legal. But world would be far away till then.

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