Pakistan to Introduce Crypto Regulations by 2024
Cryptocurrency is experiencing a surge in popularity in Pakistan, leading the government to recognize the need for regulation. Pakistan is an emerging market in Southeast Asia with a population of around 250 million, a significant portion of which lives below the poverty line. Despite this, there is a sense of hope that better times are on the horizon. The adoption of Bitcoin has been on the rise in Pakistan, even without the presence of a regulated exchange. The widespread acceptance of cryptocurrency in the country makes it necessary to establish crypto regulations in the region.
According to a report by Coinpedia, the regulatory scenario for crypto in Pakistan in 2024 will be explored. Despite the absence of a regulatory framework, there has been a significant increase in crypto adoption, including Bitcoin, in Pakistan. People in the country utilize peer-to-peer services such as Binance and Paxful, as well as other over-the-counter trading methods. In 2020, the Securities and Exchange Commission of Pakistan (SECP) released a paper outlining potential approaches to regulating crypto in the country. The State Bank of Pakistan issued a public notice stating that cryptocurrencies are not recognized as legal tender, and the SBP has not authorized or licensed any individual or entity for virtual currency issuance or operations.
Despite the challenges posed by regulatory issues, Pakistan ranks sixth in the global crypto adoption index, with an estimated crypto market worth between $18-25 billion. The adoption of Bitcoin can be attributed, in part, to the country’s annual inflation rate exceeding 25% and worsening political turmoil in recent years. Pakistan has the potential for widespread adoption of cryptocurrencies and is considered one of the emerging markets in Southeast Asia. The existence of communities like “Bitcoin Pakistan” indicates that there are crypto enthusiasts in the country who are embracing the crypto revolution.
While cryptocurrencies like Bitcoin are not officially regulated in Pakistan, they are not illegal either. As of January 16, 2021, the State Bank of Pakistan has not authorized any individuals or organizations to engage in the sale, purchase, exchange, or investment of virtual currencies, coins, and tokens. There have been several arrests related to the mining of Bitcoin and other cryptocurrencies by the Cyber Crime Wing of the Federal Investigation Agency, with charges related to money laundering.
Despite the controversies surrounding virtual currencies, prominent Pakistani bloggers and social media influencers are openly involved in Bitcoin trading and regularly publish content supporting the regulation of cryptocurrencies. In December 2020, the Khyber Pakhtunkhwa government became the first province in Pakistan to pass a resolution to legalize cryptocurrencies in the country. However, in May 2023, the government of Pakistan announced a ban on crypto and blockchain-related activities, citing concerns over terrorism financing and money laundering, as well as compliance with the Financial Action Task Force (FATF). The State Bank of Pakistan initially revealed its plan to ban crypto in January 2022, and the Minister of Finance stated that crypto cannot be legalized in the country due to FATF conditions.
The legal status of cryptocurrencies in Pakistan is as follows:
– Bitcoin: Banned/Illegal
– NFTs: Illegal
– Mining: Illegal
– Trading: Illegal
– DeFi: Allowed
Currently, there is no tax on holding or trading crypto assets in Pakistan, but there have been proposals for taxation. The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has suggested a tax on converting crypto to Pakistani rupees, a 5% tax on encashing crypto held as deposits in foreign exchange accounts, and a 10% tax on encashing crypto held as deposits in Roshan digital accounts. The proposed law would classify crypto gains as securities and impose a 15% tax on profits from crypto trading.
The future prospects and challenges of the crypto scenario in Pakistan are influenced by the fact that the principles of Islam, which is widely followed in the country, contradict those of cryptocurrency due to its element of uncertainty. The absence of central authorities or intermediaries in crypto transactions leaves room for potential fraud, and the high volatility of crypto is considered “gharar” (uncertainty) in the Islamic finance system.
Despite its illegal status, Pakistan has seen significant growth in crypto adoption, with enthusiasts exploring the possibilities associated with cryptocurrencies. Debates and discussions surrounding the legalization of crypto are ongoing in the country, and there is optimism for a more favorable approach by the Pakistani government in the future.
In conclusion, the recent surge in Bitcoin adoption in Pakistan highlights the need for regulation in the country. Despite the absence of a regulatory framework, people in Pakistan are using peer-to-peer services and other trading methods to acquire Bitcoin. The country ranks among the top countries in terms of Bitcoin adoption in emerging markets. The regulatory framework for crypto in Pakistan is gradually evolving as acceptance of cryptocurrencies gains momentum.