Cryptocurrency Regulation in Pakistan: Current Status and Future Prospects
The Finance Secretary of Pakistan, Imdadullah Bosal, reaffirmed on Thursday that the prohibition on cryptocurrency remains enforced throughout the country. He emphasized the urgent need for regulatory measures to address the burgeoning digital currency landscape.
State Bank’s Stance on Cryptocurrencies
The State Bank of Pakistan (SBP) has officially stated that it does not recognize cryptocurrencies as legitimate assets. These digital currencies utilize decentralized systems for transaction verification and record-keeping. In 2022, the SBP issued a public advisory urging caution and advising citizens to avoid engaging in cryptocurrency trading due to the inherent risks involved.
During a recent session of the National Assembly Standing Committee on Finance, Member of the National Assembly (MNA) Sharmila Farooqi brought forward a legislative proposal aimed at establishing regulations for digital currencies. This proposal sparked a variety of reactions from the committee members, highlighting differing opinions on the future of cryptocurrency in Pakistan.
The Need for Cryptocurrency Regulation
MNA Farooqi pointed out the absence of any regulatory framework for cryptocurrencies. As Pakistan progresses toward adopting digital currencies, she argued that regulations must ensure that these assets remain decentralized. She raised a crucial question regarding how the country plans to mitigate risks associated with money laundering in a crypto landscape, particularly in light of Pakistan’s recent exit from the ‘grey list’ of the Financial Action Task Force (FATF), which oversees global anti-money laundering efforts.
In 2018, Pakistan found itself on the FATF’s grey list, accused of failing to implement sufficient measures against money laundering and terrorism financing. However, the country successfully removed itself from this list in 2022, an achievement that added urgency to creating a robust legal framework for digital currencies.
Efforts Toward Regulatory Framework
Finance Secretary Bosal acknowledged the SBP’s existing ban on cryptocurrency investments while revealing that preliminary steps are underway through the recently established Crypto Council. He stressed that the council requires comprehensive regulations to efficiently manage cryptocurrency in the country.
The Pakistan Crypto Council (PCC) was officially launched in March with the objective of regulating blockchain technology and digital assets in Pakistan’s financial framework. SBP official Sohail Jawad emphasized that a legal structure is necessary for cryptocurrencies. He mentioned the creation of a National Working Group on Digital Currency that is tasked with formulating recommendations for the Crypto Council.
Jawad also highlighted that to date, only El Salvador has fully legalized cryptocurrency, and it is now reconsidering that decision, signaling potential pitfalls in the legalization process.
Different Perspectives on Cryptocurrency Holding
Committee member Osama Ahmed asserted that there is no blanket ban on holding cryptocurrency within Pakistan. He pointed out that cryptocurrencies are currently being utilized for international transactions, including the import of vehicles from Japan. This raises essential questions regarding the SBP’s actions in monitoring such transactions and the government’s role in regulating cryptocurrency mining activities.
MNA Mirza Ikhtiar Baig highlighted the growing interest among the youth in cryptocurrency investments. He remarked that the increasing valuation of cryptocurrencies calls for a clear governmental stance on whether these digital assets are legal or not.
Bosal reiterated that while the Crypto Council was initiated under the approval of the prime minister, it has yet to receive formal legal endorsement. He emphasized that the council must act on the concerns raised in the committee meeting.
Recent Developments in Cryptocurrency Infrastructure
In a significant development, PCC CEO Bilal Bin Saqib announced the launch of Pakistan’s first government-sanctioned Strategic Bitcoin Reserve. This initiative is part of a broader strategy to integrate digital assets into the national financial framework.
Saqib emphasized the establishment of a national bitcoin wallet that will hold digital assets currently in state custody. He clarified that these assets are not for speculative trading but serve as a sovereign reserve, showcasing the government’s confidence in decentralized finance.
Additionally, the government has made provisions for 2,000 megawatts of surplus electricity to support bitcoin mining and AI data centers. This move aims to attract domestic and international miners, tech companies, and clean energy partners.
However, Baig raised concerns regarding the electricity pricing set for cryptocurrency mining—ranging from seven to eight cents per unit—while manufacturing industries in Pakistan are facing rates of nine cents per unit. He suggested that aligning electricity costs could enhance the country’s export potential and improve energy accessibility for residential consumers.
Concerns About Electricity Allocation
Farooqi questioned the decision-making process behind the allocation of the 2,000 megawatts for cryptocurrency mining, urging whether proper evaluations were conducted considering the prevailing electricity shortages in the country.
As cryptocurrencies gain global traction, with various use cases emerging, many nations are moving toward legal acceptance. However, regulatory responses continue to vary significantly. In some jurisdictions, such as El Salvador, cryptocurrencies are recognized as legal tender. In stark contrast, countries like Pakistan, India, and China see cryptocurrencies as unacceptable payment forms, leading to an ambiguous legal standing.
Conclusion: The Path Ahead for Cryptocurrency in Pakistan
As discussions continue on the regulation and future of cryptocurrency in Pakistan, the need for a comprehensive framework becomes increasingly evident. With significant advancements in digital asset infrastructure and ongoing debates in legislative circles, Pakistan is at a crossroads concerning its approach to cryptocurrency.
The pursuit of regulatory clarity could play a crucial role in enhancing investment opportunities, fostering innovation in blockchain technology, and ensuring that the risks associated with cryptocurrency are effectively managed. As the global landscape shifts, the decisions made in the coming months will undoubtedly shape the future of cryptocurrencies in Pakistan.
