Pakistan to Introduce Cryptocurrency Regulations by 2024
Cryptocurrency is experiencing a surge in popularity in Pakistan, prompting the government to recognize the need for regulation. As one of the emerging markets in Southeast Asia, Pakistan has a population of approximately 250 million, with a significant portion living below the poverty line. Despite the lack of a regulated exchange, Bitcoin adoption in Pakistan has been on the rise. This widespread acceptance of cryptocurrency has created a need for crypto regulations in the region.
According to a report by Coinpedia, the regulatory scenario for crypto in Pakistan in 2024 is explored. Despite the absence of an existing regulatory framework, crypto adoption, including Bitcoin, has seen a significant increase in Pakistan. People in the country utilize peer-to-peer services like Binance and Paxful, as well as other over-the-counter trade methods. In 2020, the Securities and Exchange Commission (SECP) of Pakistan released a paper discussing potential approaches to regulate crypto. The State Bank of Pakistan has also issued a public notice stating that cryptocurrencies are not legal tender and that the bank has not authorized or licensed any individual or entity for virtual currency operations.
Despite regulatory challenges, Pakistan ranks sixth in the global crypto adoption index, with an estimated crypto market value of $18-25 billion. The growing adoption of Bitcoin in Pakistan can be attributed to the country’s high inflation rate, which has exceeded 25% annually and worsened in recent years due to political instability. The potential for mainstream adoption of cryptocurrencies in Pakistan is significant, as the country 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.
Currently, cryptocurrencies like Bitcoin are not officially regulated in Pakistan, but they are not illegal either. 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 arrests related to the mining of Bitcoin and other cryptocurrencies by the Cyber Crime Wing of the Federal Investigation Agency (FIA), with charges related to money laundering.
Despite the controversies surrounding virtual currencies, prominent Pakistani bloggers and social media influencers openly engage in Bitcoin trading and advocate for crypto regulation. In December 2020, the Khyber Pakhtunkhwa government became the first province in Pakistan to pass a resolution to legalize cryptocurrency in the country. However, in May 2023, the government announced a ban on crypto and blockchain-related activities to prevent illegal digital currency transactions and comply with the Financial Action Task Force (FATF) regulations on terrorism financing and money laundering.
As of now, blockchain-based and crypto-related activities are not supported by regulatory agencies in Pakistan. The recent ban has led to criticism of certain crypto-related activities. Bitcoin is considered banned or illegal, while NFTs, mining, and trading are also deemed illegal. On the other hand, decentralized finance (DeFi) is allowed. Currently, there is no tax on holding or trading crypto assets in Pakistan, but there have been proposals for taxation. These proposals include a tax on converting crypto to Pakistani rupees, a tax on encashing crypto held in foreign exchange accounts, and a tax on profits from crypto trading.
The future prospects for crypto in Pakistan are uncertain due to conflicting principles with Islam and the element of uncertainty associated with cryptocurrencies. The absence of central authorities or intermediaries raises the possibility of fraud, and the high volatility of crypto is considered “gharar” or uncertainty in the Islamic finance system. Despite its illegal status, Pakistan has seen significant crypto adoption, and enthusiasts are exploring new possibilities. Debates and discussions about crypto legalization are ongoing, and it is hoped that the Pakistani government will adopt a more favorable approach to crypto in the future.
In conclusion, the adoption of Bitcoin in Pakistan has increased significantly, even in the absence of a regulatory framework. People in Pakistan use peer-to-peer services like Binance and OTC trade methods to acquire Bitcoin. Pakistan ranks among the top countries in terms of Bitcoin adoption rate in emerging markets. The regulatory framework for crypto in Pakistan is gradually evolving to keep up with the growing acceptance of cryptocurrencies in the country.