Pakistan bans all crypto-currencies following China

Islamabad: Pakistan has banned use of all crypto-currencies following Iron Brother China.

The State Bank of Pakistan and the federal government told the Sindh High Court (SHC) in a report that at least eleven countries including China and Saudi Arabia that had banned crypto-currencies.

The status of crypto-currencies 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 had told the federal government to regulate crypto-currencies 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 crypto-currencies.

The court had instructed the authorities to come up with a report on the use of crypto-currencies. The report was submitted to the Sindh High Court on Wednesday. The report said that crypto-currency is illegal and could not be used for trade as in the case of China.

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

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

The law and finance ministries will determine if a ban against crypto-currencies would be within the ambit of the Constitution. They 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 crypto-currencies be formally declared illegal. The report says that crypto-currency is a virtual business that could be used to finance acts of terrorism and to launder money.

Petitioner Waqar Zaka had pleaded with the court that crypto-currencies be declared legal as a large number of Pakistanis were interested in them. The court will next hear the case on April 12.

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

However, before this 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 or Pakcoin were 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.