Regulatory Landscape of Cryptocurrency in Pakistan
On Thursday, Finance Secretary Imdadullah Bosal reaffirmed that the prohibition on cryptocurrency remains enforced throughout Pakistan, emphasizing the urgent need for regulatory frameworks. As digital currencies gain wider attention globally, the need for organized governance is more pressing than ever.
The State Bank of Pakistan (SBP) does not recognize cryptocurrencies, which are digital currencies employing decentralized systems for transaction verification and recording. In 2022, the SBP released an advisory to inform the public about the risks associated with trading cryptocurrencies, urging caution due to the lack of regulatory measures.
Discussion in the National Assembly
During a recent session of the National Assembly Standing Committee on Finance, Sharmila Farooqi, a member of the Pakistan People’s Party (PPP), put forth a proposed bill aimed at establishing regulations for digital currencies. Her initiative sparked various responses from fellow committee members. Farooqi pointed out the absence of any regulatory framework surrounding cryptocurrency while advocating for a decentralized approach as Pakistan transitions towards digital currency solutions.
She also brought attention to Pakistan’s recent removal from the ‘grey list’ of the Financial Action Task Force (FATF), which monitors global money laundering and terrorism financing activities. Farooqi posed a critical question, “How will Pakistan safeguard cryptocurrency against money laundering threats?”
Pakistan’s Grey List History
In 2018, FATF placed Pakistan on its ‘grey list’ due to perceived deficiencies in measures against terror financing and money laundering. This designation remained until 2022, when the country was successfully removed from the list, indicating improvements in its compliance with international regulations.
Highlighting the ongoing SBP ban on cryptocurrency investments, Bosal stated, “Preliminary efforts are progressing within the Crypto Council; however, there is an evident requirement for formal regulations governing cryptocurrency.”
The Pakistan Crypto Council (PCC), established in March this year, aims to facilitate the incorporation and regulation of blockchain technology and digital assets within Pakistan’s financial ecosystem.
Legal Framework and Future Considerations
According to SBP official Sohail Jawad, the establishment of a legal framework for cryptocurrency remains essential. He mentioned the formation of a National Working Group focused on Digital Currency, which has presented recommendations to the Crypto Council.
Jawad noted, “Only El Salvador has legalized cryptocurrency globally, and even it appears to be reevaluating that decision.” This statement highlights the cautious approach many nations adopt concerning virtual currencies, emphasizing the need for thorough investigation before any legal determinations.
In contrast, committee member Osama Ahmed asserted, “There is no prohibition on the possession of cryptocurrency in Pakistan.” He pointed out that cryptocurrency is currently being utilized for transactions, such as purchasing vehicles from Japan, questioning whether the State Bank has taken any steps to regulate this activity and whether the government oversees the mining aspects of cryptocurrency.
The Youth and Cryptocurrency Investment
MNA Mirza Ikhtiar Baig acknowledged that many young individuals are investing in cryptocurrencies, noting an increase in their values attributed to government policies. He urged for a clear stance from the government on whether cryptocurrency is considered legal or not.
Bosal confirmed that while the Crypto Council has been established through the Prime Minister’s executive endorsement, formal legal approval is yet to be granted. He recognized the necessity for the Council to address the concerns raised during the meeting.
Earlier in the day, Bilal Bin Saqib, CEO of the PCC, unveiled Pakistan’s inaugural government-led Strategic Bitcoin Reserve. During his keynote address, Saqib announced plans for a national bitcoin wallet, which would store digital assets currently held by the state, not for trading or speculation but as a sovereign reserve to demonstrate long-term confidence in decentralized finance.
Energy Allocation for Cryptocurrency Mining
Saqib also revealed that the government had earmarked 2,000 megawatts of surplus electricity in the initial phase for bitcoin mining and AI data centers. This allocation is intended to attract sovereign miners, technology firms, and clean energy partners globally. Baig questioned why the government offers a lower electricity rate for cryptocurrency mining—seven to eight cents—while local industries are demanding nine cents per unit.
He remarked, “If industries could access electricity at this rate, our exports would increase. The government should extend this rate to residential consumers as well.” Farooqi echoed these concerns, asking about the rationale behind the decision to allocate 2,000 megawatts of power for crypto mining, especially given the persistent electricity shortages faced by Pakistan.
Global Trends in Cryptocurrency Acceptance
Globally, cryptocurrencies are experiencing a surge in popularity, with various use cases emerging and numerous countries working towards legalizing them. However, regulatory responses vary widely. Countries like El Salvador have granted cryptocurrencies legal tender status, while others—including Pakistan, India, and China—continue to restrict their use for transactions and ownership.
As the global landscape evolves, the ongoing discussions within Pakistan’s government remains crucial as they attempt to create a balanced approach that allows for innovation while managing risks effectively. The complexity of this issue highlights the necessity of robust regulatory frameworks that address both the potential benefits and challenges of cryptocurrency adoption in Pakistan’s financial system.
