According to a report submitted to the Sindh High Court (SHC) on Wednesday, the federal government and the State Bank of Pakistan are urging an outright ban on transacting in all cryptocurrencies.
As in many countries across the world, with the exception of China and a few others, regulation on cryptocurrencies is generally vague or at least in limbo until most can figure out what to do with them.
The same can be said in Pakistan, where hitherto regulation on trading and holding cryptocurrencies has been mostly absent. However, the ultimately powerful Sindh High Court has upped the ante, and ordered the federal government to impose regulation within the next three months.
According to an article on the Pakistani Samaa website, the court has directed the government to form a committee overseen by the federal secretary of finance, which will work on putting cryptocurrencies into a legally regulated structure.
With this in mind, the Pakistan Central Bank has come out decisively against cryptocurrencies in its report to the SHC. In the report, the bank recommends that crypto assets be banned, and in addition, that penalties be imposed against all exchanges that transact in them.
With the central bank recommending that crypto assets be declared illegal, the SHC has ordered that the report be sent to the finance and law ministries in order to have their input on how the status of crypto assets can be legally put into a framework.
The State Bank of Pakistan appears to be going down the anti-crypto path followed by China, and echoes the usual statements put out by other central bank leaders that virtual currencies are used for money laundering and for financing terrorism.
Given that the bank is investigating the potential use of its own digital virtual currency, it would not welcome the competition from private forms of these currencies. It’s no doubt for this reason that the bank recommends a total ban on private digital assets.
What the federal government and its central bank plan to do will not be welcome by many investors in Pakistan. According to the Federation of Pakistan Chambers of Commerce and Industry President Nasir Hayat Magoon, around $20 billion in value has already been invested in private digital currencies in the country. Where all that value will go should a ban come into being is certainly an interesting question.
It might be imagined that such heavily bureaucratic entities as China and Pakistan, will have a huge job on their hands trying to shut down the crypto sector in their countries.
Widespread bans across these states is only likely to increase the innovation in decentralised finance platforms. Many will seek to use them in order to escape the restrictions and threats to freedoms that central bank digital currencies will impose.