A committee headed by the deputy governor of the State Bank of Pakistan (SBP) has recommended a complete ban on cryptocurrency, saying that allowing it could lead to an outflow of foreign exchange and illicit money.
The report was presented before a two-member bench of the Sindh High Court (SHC), which heard a petition regarding the digital cryptocurrency. The court sent the 38-page report to the Ministry of Finance and the Ministry of Law to review its legal aspects.
The committee recommended a complete ban on cryptocurrency and related activities in Pakistan. Heading the bench, Justice KK Agha remarked that in case of imposition of the ban, the court should also be informed about the constitutional status of the ban.
A two-judge bench headed by Justice Mohammad Karim Khan Agha directed the committee to send its report to the ministries of finance and law to consider it at a joint meeting and take a final decision whether cryptocurrency was allowed in Pakistan.
It also asked both ministries for their recommendations about whether the business of cryptocurrency in any form can legally be carried out in the country, as this was causing difficulty for people engaged in this business keeping in view the constant raids and the freezing of bank accounts of users and dealers allegedly by the Federal Investigation Agency (FIA).
Bench directed the ministries to file their joint recommendations
The bench further directed the ministries to file their joint recommendations until April 11 and directed the secretary or additional secretary finance and secretary law or any other senior official of the ministry well conversant with cryptocurrency to appear in person at the next hearing. It asked that if cryptocurrency was allowed, what would the regulatory framework be of such business.
“We had anticipated that the committee might have made some kind of recommendation for the regulation of this business which if driven underground raises concerns in connection with both money laundering and terror financing,” the bench said.
The bench constituted the committee, headed by State Bank of Pakistan deputy governor Sima Kamil, in the last hearing. Representatives from the finance division, the Ministry of Information Technology, the Securities and Exchange Commission of Pakistan, Pakistan Telecommunication Authority, the director general of the Financial Monitoring Unit and petitioner Waqar Zaka were also part of the committee to consider whether any form of cryptocurrency is to be permissible in Pakistan keeping in view of Article 18 of the Constitution.
On Wednesday, Ms Kamil filed the report which noted that after a careful risk-benefit analysis, it emerged that the risks of cryptocurrency outweigh its benefits in Pakistan.
Cryptocurrency leads to flight of foreign exchange ! Report says.
“The only use of cryptocurrency in Pakistan seems to be speculative in nature where people are being enticed to invest in such coin for the purpose of short-term capital gains. This may result in the flight of precious foreign exchange as well as the transfer of illicit funds from the country. In view of this, the committee would like to make the above recommendation to the secretary ministry of finance”, the report said.
The SHC committee also recommended that cryptocurrency exchanges like Binance, OctaFX, etc, should be banned for their unauthorised operations in the country and dissuasive penalties should be imposed on them by the federal government, as some other countries have done.
Cryptocurrency in other countries !
The report added that many countries, including China and Turkey, had banned cryptocurrency, Japan, Australia, New Zealand and several other countries treated it as assets or legal property, whereas Russia and Dubai considered it a taxable property and had introduced a regulatory framework to use it as investment tokens.
The petitioner contended that cryptocurrency was based on decentralised digital money and regulating facilities were available and recognised in relation to cybercrime. He claimed that there were many unregulated institutions in the country that were illegally carrying out cryptocurrency business.