Pakistan Government’s Crackdown on Crypto Takes a Firm Stance

Local media reports that Pakistan’s government and central bank plan to ban cryptocurrencies, citing a court document. The central bank has also asked the Sindh High Court to impose penalties on “unauthorized operations” by crypto exchanges.

Banning Crypto in Pakistan

Earlier this week, a team led by Sima Kamil, deputy governor of the State Bank of Pakistan (SBP), produced the ban document. Other participants in the making were representatives from the Ministry of Finance and Pakistan’s SEC (SECP). In addition, the FIA chipped in.

According to local media sources, the central bank’s statement marks the first time it has taken a firm stance. The committee’s government and regulatory representatives lend the extra report authority. That way, it can reflect potential policy actions. The SBP issued a circular in 2018 barring banks from doing business with cryptocurrency exchanges.

“This indicates that, unlike in the past, this is a policy move which has greater consensus and coordination,” said Ali Farid Khwaja. He is a partner at Oxford Frontier Capital and chairman of KTrade KASB Securities, a stock brokerage in Karachi.

The FIA Crackdown

A concerted crackdown by the FIA accompanied the SBP-led investigation. The crackdown focuses on the peer-to-peer network and illegal crypto operators, as well as warning letters issued by SECP.

The Federal Investigation Agency (FIA) stated that it wanted to speak with Binance. It is as part of a probe into a potential scam that has cost tens of thousands of investors more than $100 million.

The committee presented its findings to the Sindh High Court. Upon hearing the matter involving digital currency, the court ordered its formation. It expressed concerns about using crypto for money laundering and terrorism financing.

Waqar Zaka, a television host and crypto entrepreneur, filed the petition requesting the court to determine that cryptos be declared lawful. As per Zaka, a substantial number of Pakistanis are interested in virtual currencies. According to the Chainalysis Global Crypto Adoption Index, the country has the third-highest crypto adoption rate in the world.

The court forwarded the 38-page report to the finance and law ministries for review. A news report also directed them to assess whether a ban on cryptocurrency is constitutional.

More Regulation in Place

Following the Financial Action Task Force (FATF) request, the government has formed a separate committee to investigate a regulatory approach. Since 2018, Pakistan has been on its gray list, limiting its access to foreign financial aid.

“I don’t think this means Pakistan has decided to ban it,” said Faisal Aftab, a co-founder of Zayn Capital. “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.”