Pakistan Bans Crypto Again This Time Seriously?

Recently, the State Bank of Pakistan (SBP) and the federal government decided to ban all cryptocurrencies. This is not the first ban. In April 2018, the SBP banned financial service providers from supporting and using virtual currency transactions, and banned domestic and international cryptocurrency-related payments and transfers.

But Khyber Pakhtunkhwa passed a draft resolution in December 2020 to legalize cryptocurrencies and cryptocurrency mining.

And, the Securities and Exchange Commission of Pakistan (SECP) has initiated the process of developing a regulatory framework for cryptocurrencies to govern the trading of digital financial assets in the country.

While talking about prohibition, legalization and starting the regulatory process are on the other hand. What kind of trouble is this going to make?

Cryptocurrency development goes against the ban

In October 2021, the Sindh High Court asked the federal government to regulate cryptocurrencies within three months, and as a result SBP and the federal government chose to ban all cryptocurrencies.

Although the above said prohibition, the development of cryptocurrencies in China is contrary to it.

On January 10, 2022, the Federal Bureau of Investigation (FIA) of Pakistan issued an official notice to the crypto exchange Binance in order to investigate a crypto scam involving hundreds of millions of dollars in funds.

Previously, according to documents from the Pakistan Policy Advisory Council, the country could earn billions of dollars from crypto asset holders. Regulation, to get this part of the income.

According to data from the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), as of December 2021, the total value of crypto assets held by Pakistani citizens is about $20 billion, which has exceeded the foreign exchange reserves of the Central Bank of Pakistan. The Chainalysis report also shows that Pakistan has the third highest cryptocurrency adoption rate in the world.

Late last year, the FIA ​​froze the bank accounts of more than 1,000 people for transactions involving cryptocurrency exchanges worth a total of $288,000, including Binance, Coinbase, and others. The agency also reminded residents that the SBP issued a notice in April 2018: Prohibiting the purchase and sale of cryptocurrencies.

In addition, in April 2019, the governor of the central bank revealed that SBP is conducting research on the concept of digital currency to promote the country’s “inclusive financial development, improve the efficiency of financial institutions, and reduce corruption.” They also plan to launch a central bank digital currency in 2025 and complete the digital reform of services and technology in 2030.

In addition to the ban, the development of cryptocurrencies in Pakistan is all the way to the sun, and what is the specific development process?

Before the national policy is determined, the advanced provinces have legalized cryptocurrencies and mining

In fact, as early as April 2018, SBP issued a notice prohibiting all domestic financial service providers from supporting and using virtual currencies, as well as domestic and international cryptocurrency-related payments and transfers.

On September 4, 2017, China also issued a ban, which caused the domestic encryption industry to suffer setbacks, but the currency price represented by BTC quickly rebounded. The situation in Pakistan was similar, when the price of PakCoin, the country’s first and only cryptocurrency, soared by more than 60%.

Meanwhile, Urdubit, the first nationwide bitcoin exchange, announced its closure in the wake of the ban and urged its customers to withdraw funds as soon as possible. The Urdubit co-founder said the move is aimed at deterring domestic cryptocurrency investments.

But in fact, this does not prevent individual traders from trading cryptocurrencies through other channels, and there are also media reports that the ban has not had the expected effect.

In March 2019, SECP shut down nine cryptocurrency companies that offered Ponzi scheme marketing. But then, the governor of the central bank mentioned that he is studying the concept of digital currency and plans to launch information such as central bank digital currency.

In addition, the government has also opened up the review and licensing of enterprises engaged in the electronic currency field to stabilize the security of the digital currency and payment market. This reveals that the government is gradually opening up and allowing corresponding businesses to exist and operate.

However, the above did not stop the seizure of crypto mining farms. In January 2020, the FIA ​​seized two illegally established crypto mining farms, which are said to be the country’s largest crypto mining farms with about 65 devices.

In November of the same year, news came that the government was working on a framework to regulate cryptocurrencies such as Bitcoin. Published on November 6, the document outlines key concepts for Pakistan’s growing digital financial market and examines existing regulatory frameworks developed by other jurisdictions around the world.

In December, Khyber Pakhtunkhwa province passed a draft resolution legalizing cryptocurrencies and cryptocurrency mining. Not only was it the first province in Pakistan to set up a crypto and mining advisory committee, it also passed plans in the provincial assembly to build two hydroelectric power plants to support a cryptocurrency pilot, following the announcement of the launch of two state-owned bitcoin mining farms.

While Pakistan’s Sindh High Court expressed dissatisfaction with the Federal Ministry of Finance’s failure to comment on a petition on cryptocurrencies, the SBP said it never declared cryptocurrencies illegal.

From this point of view, although the Pakistani government has just announced the ban on cryptocurrencies, some provinces have developed ahead of schedule, and it is unclear how the domestic situation will progress.

Central bank digital currency, a breakthrough?

Since April 2019, after the central bank governor revealed plans to issue a central bank digital currency, he said in April 2021 that it is beneficial to be cautious about cryptocurrencies.

“We are in the research phase and hope to be able to make some announcements on this in the next few months.” At the same time, the central bank is actively exploring digital currencies.

Yesterday, the nominee for the chairman of the Federal Reserve stated that the Federal Reserve is lagging behind in formulating a blockchain strategy and a global CBDC ecosystem. India’s central bank is creating a fintech ministry for research and development of CBDC; Thailand delays CBDC pilot; Russia’s central bank plans to start CBDC pilot after January holiday…

According to reports, China is expected to be the first sovereign power to implement a large-scale CBDC plan. At present, China’s CBDC has been piloted in many cities and is progressing in an orderly manner. A Japanese expert said that Japan could be as long as six years behind China in the CBDC race.

On the road to CBDC, the competition is fierce. If the country bans cryptocurrencies and develops CBDC, it will be in line with China, but what will happen specifically, no one can see that distant future for the time being.

But what we can see is the similarities in history. The countries that have walked ahead will also experience the same path that the latecomers have experienced. As for whether the results are different, it also depends on their own courage and innovation.

Writer Fitzgerald said, “Tomorrow we’ll run a little faster, stretch our arms a little further, and one day…”

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