By Abdul Wajid Khan

ISLAMABAD, Aug 4, (INP-WealthPK): The government has decided against allowing the business of cryptocurrency in Pakistan, saying it has no economic benefits for the country, WealthPK reports.

According to a report of the Ministry of Finance, a special committee was formed to deliberate on the matter. Led by the deputy governor of the State Bank of Pakistan, the committee consisted of officials of the Ministry of Finance (MoF), Ministry of Information Technology and Telecommunication (MoITT), Security and Exchange Commission of Pakistan (SECP), Pakistan Telecommunication Authority (PTA) and Financial Monitoring Unit (FMU).

The committee noted that the business of cryptocurrencies involved several risks including the flight of foreign exchange from the country and their potential use in criminal activities. It said that the country lacked adequate resources, skills and tools to monitor the business effectively.

The report said that legal recognition and a regulatory framework for customers of cryptocurrency were non-existent in the country. It said that the monitoring of cryptocurrencies was also a challenge as those are decentralised in nature. Cryptocurrencies are largely created in foreign countries and some individuals can control their issuance and circulation.

According to the report, another significant concern of the committee is that the use of cryptocurrency will entice people to invest in such coins for short-term capital gains. No official data is available about the cryptocurrency purchased by Pakistanis during the last three years.

SBP has already issued instructions to all banks, development financial institutions (DFIs), microfinance banks, payment system operators (PSOs), payment service providers (PSPs) and exchange companies to refrain from processing, using, trading, holding, transferring value, promoting and investing in cryptocurrencies.

SBP has also cautioned people that cryptocurrencies like Bitcoin or initial coin offerings (ICO) tokens are not legal tender, issued or guaranteed by the government of Pakistan. Any transaction in this regard should be immediately reported to FMU as a suspicious transaction that would act as per existing laws in this regard.

According to a report of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), cryptocurrency adoption in Pakistan gained momentum during the last couple of years. The country has been ranked third now on Global Crypto Adoption Index in 2020-21.

The value of cryptocurrency was recorded around $20 billion in Pakistan in 2020-21, showing an abnormal increase of 711 percent. The current legal framework in Pakistan has held cryptocurrency in the grey area.

The SBP has advised the people to refrain from indulging in the business of cryptocurrencies. The SBP has prohibited entities under its umbrella from dealing in virtual currencies.

Economists and analysts told WealthPK that cryptocurrency had no future in Pakistan. It cannot be called a currency as it does not fulfil the requirements of a currency. Pakistan also lacks an effective strategy to overcome the risks associated with the use of cryptocurrency.

Credits:Independent News Pakistan—Wealthpk