All recommendations are ultimately forwarded to the committee, which is chaired by the Secretary of Finance. Pakistan could consider a blanket ban on crypto transactions or strong legal control over the industry. “I don`t think Pakistan has decided to ban it,” said Faisal Aftab, co-founder of Zayn Capital. “I think they`re still researching regulation. The ambiguity is whether Pakistan will consider cryptocurrencies as an asset. But it is almost clear that it is not considered legal tender. This is the first time the central bank has taken a clear position, according to media reports. The inclusion of government and regulatory representatives on the committee gives the report additional powers as a reflection of possible policy initiatives. In 2018, SBP issued a circular prohibiting banks from dealing with cryptocurrency exchanges. Second, regulation of cryptos is necessary for the state to benefit from the taxation of crypto income. More and more people will trade cryptos or touch the crypto ecosystem in any way, and the treasury that doesn`t benefit from these profits seems to be a massively missed opportunity in a country where tax collection is otherwise a major challenge. If we can go further and Pakistan can allow favorable corporate taxation on cryptocurrencies, Pakistan could become a hub in the region, attracting organizations built on blockchain or using cryptocurrencies, thus encouraging new foreign direct investment. Third, for a country where the size of its foreign exchange reserves has been a concern for most of its recent history, the ecosystem with a regulated crypto could enable an increase in remittances using many newer blockchains, offering negligible transaction fees and near-instant cross-border payments.
This could increase the amount and frequency of foreign remittances. who enter the country. Fourth, crypto regulation can be used to reduce capital flight. As the Pakistani rupee collapses against the US dollar, cryptos can provide a secure but legal store of value that prevents capital outflows. Finally, on a more holistic level, Pakistan has a rare, albeit fleeting, chance to be at the forefront of the next technological revolution by adopting and regulating cryptocurrencies. On the other hand, the Pakistan Telecommunications Authority has spoken out against the ban on cryptocurrency. PTA explained that the ban could harm other connected technologies and hamper IT startups. Many companies are currently working on innovative blockchain-based solutions, including e-voting systems, supply chain management, implementation of encrypted identity systems, and innovative implementations of real estate technologies (prop tech).
Explaining to regulators that we stand for the same values they are trying to defend seems like an uphill battle at this point. However, we are confident that we will achieve this goal in due course, and the democratisation of the financial markets is something that our citizens desperately need. Baqir is open to the idea of CBDC – digital tokens, similar to cryptocurrency, issued by a central bank and pegged to the value of that country`s currency. They can help improve financial inclusion, reduce cross-border transaction costs and make payment systems more efficient. These committees need to actively discuss whether banning cryptocurrency would limit the country`s technological advances. FIA issues notice to popular cryptocurrency exchange Binance Dr. Reza Baqir, former governor of the State Bank of Pakistan (SBP), said in March that the dangers of using cryptocurrency outweigh the benefits. Earlier, the central bank issued an official advisory warning the public to be cautious and avoid trading cryptocurrencies. A regulatory framework for this asset class should be developed in Pakistan as soon as possible.
The lack of an appropriate legal framework leads to a shift in demand for cryptocurrency to unregulated or underground operators.