The State Bank of Pakistan and the federal government have decided to ban the use of all cryptocurrencies, according to a report submitted to the Sindh High Court (SHC) on Wednesday.
The Sindh High Court (SHC) in Pakistan has been hearing cases related to digital currencies. Previously, the SHC asked the federal government to regulate cryptocurrencies within three months. The court directed the government to create a committee headed by the federal finance minister to determine the legal status of cryptocurrencies.
The status of cryptocurrencies in Pakistan has been in limbo due to the lack of laws and rules to regulate the use of these digital currencies in trade. The court has directed the authorities to file a report on the use of cryptocurrencies. The report was submitted to the Sindh High Court on Wednesday. Cryptocurrencies are illegal and cannot be used for transactions, the report said. The report lists at least 11 countries that have banned cryptocurrencies, including Saudi Arabia. The report also mentions recent FIA investigations into cryptocurrency exchanges such as Binance and OctaFx, and the risks these exchanges pose to investors.
The Sindh High Court has ordered the report to be sent to the Ministry of Finance and the Ministry of Law for a final decision on the legal status of cryptocurrencies. The law and Treasury will determine whether a ban on cryptocurrencies is within the scope of the constitution. This will also create a legal framework.
In addition, the central bank took a clear stance on cryptocurrencies for the first time and urged the SHC to not only ban cryptocurrencies, but also penalize cryptocurrency exchanges. Seema Kamil, deputy governor of the State Bank of Pakistan, submitted a 38-page report recommending that cryptocurrencies be outlawed. Cryptocurrency is a virtual business that can be used to finance terrorist acts and launder money, the report said.
In the months leading up to its final decision, the court said the FBI and other agencies would continue to play by their rules.
The petitioner, Waqar Zaka, is begging the court to declare cryptocurrencies legal because a large number of Pakistanis are interested in them. Nasir Hayat Magoon, chairman of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), previously stated that Pakistani citizens own $20 billion in crypto assets. In October last year, a research report published by Chainalysis showed that Pakistan had experienced a huge increase in cryptocurrency adoption in the previous year. The 2021 Chainalysis Global Cryptocurrency Adoption Index places Pakistan in third place after Vietnam and India in its index score.
However, in December last year, a large number of investors lost Rs 100 crore. The Federal Bureau of Investigation (FIA) of Pakistan has issued an official notice to cryptocurrency exchange Binance to identify the exchange’s links to a “fraudulent online investment mobile application” after receiving numerous complaints about the ongoing scam. The scam involved misleading investors to send funds from the Binance wallet to an unknown third-party wallet.