Central Bank Says Crypto is Illegal
According to local media outlet SAMAA, a report submitted to Pakistan’s provincial court, Sindh High Court (SHC) has called for a ban on cryptocurrency. The 38-page report was submitted by the deputy governor of the SBP, Seema Kamil, to the court, which is hearing a case on digital currencies.
Part of the report did not fail to espouse the usual sentiment that cryptocurrency was used for money laundering and terrorist financing. The document further mentioned countries like China and Saudi Arabia, who banned crypto.
Back in April 2018, the SBP issued a circular prohibiting banks and other financial institutions from processing, trading, or dealing in virtual currencies and tokens. According to the central bank at the time,
“Virtual Currencies (VCs) like Bitcoin, Litecoin, Pakcoin… or Initial Coin Offerings (ICO) tokens are not legal tender, issued or guaranteed by the Government of Pakistan.”
Later in 2019, a petition was filed to overturn the central bank’s ban. In October 2021, the Sindh High Court asked the central bank and the Securities and Exchange Commission of Pakistan (SECP) to come up with a cryptocurrency regulatory framework within three months.
The court also asked for a report on the legal status of cryptocurrency in Pakistan. A committee was formed, with SBP’s Kamil as the chairman.
An excerpt from the document, as seen by Reuters, said:
“The State Bank of Pakistan has concerns over the trading of cryptocurrencies by individuals and entities, as it results in outflow of foreign exchange from the country.”
Apart from calling for a crypto ban, the committee’s report also recommended penalties against cryptocurrency exchanges illegally operating in Pakistan.
To Ban Crypto or Not?
However, Pakistani TV host and cryptocurrency entrepreneur Waqar Zaka, who filed a petition in 2019 in response to the central bank’s ban, asked that the court legalize crypto. Zaka argued that a large number of citizens were involved in cryptocurrency trading.
This is the first time that the central bank has been clear on its stance towards the nascent industry. Meanwhile, the High Court ordered that the report be sent to the law and finance ministries, which would determine the legal status of cryptocurrency. Also, the ministries would check if a ban falls within the ambit of the country’s constitution.
Pakistan’s crypto case shares some similarities with India’s cryptocurrency landscape. While the latter’s central bank, the Reserve Bank of India (RBI) also banned crypto in 2018, the Supreme Court overturned the ban in 2020, after a long legal tussle between the Indian crypto community and the RBI.
China has also been hostile towards crypto, with the country also banning trading back in 2017. The Chinese government has reiterated its ban over the years, while cracking down on different areas of crypto.
There was a massive clampdown on Bitcoin mining in 2021, which saw miners relocating to friendlier jurisdictions, causing China to lose its top spot in the global hashrate.