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Pakistan’s central bank and the federal government have recommended that crypto be completely banned. The report they have formed has been sent to the law and finance ministries for further review.
Reports have emerged that the government of Pakistan and its central bank, the State Bank of Pakistan, have decided on outlawing cryptocurrencies. Local media outlets reported on Jan 12 that the alleged complete ban recommendation would impose penalties on cryptocurrency exchanges. The ban is, as of now, a recommendation, and it remains unclear whether it will be heavily challenged as authorities review it.
The Sindh High Court (SHC) has been examining the status of digital currencies, and this marks the first time that the central bank has offered a stance on the crypto asset class. The SHC had asked the government to bring regulation to the asset class in October 2020. With the ban, it appears that none of that will be necessary, as there will be no room for crypto within the country.
The primary reasons behind the recommendation are terrorism financing and money laundering, similar to what other countries have said. However, many other countries have imposed regulation, such as KYC procedures, to prevent such acts — a far less draconian move.
The recommendations make cryptocurrencies illegal and unable to be traded — though it is unclear what the consequences would be for the individual investor. As it stands, the recommendation is quite nebulous, with the SHC asking the report to be sent to the law and finance ministries for further deliberation.
Those ministries will determine if a ban would be within constitutional rights. They will also develop a legal framework, which should offer more clarity as to what the penalties might be. Popular crypto influencers have also weighed in, saying that the “youth want crypto,” and the prime minister should offer his opinion.
Pakistan joins list of countries banning crypto
Pakistan joins about ten other countries that have banned cryptocurrencies. The most prominent of these is China, which last year banned the asset class as it was preparing its own central bank digital currency (CBDC). Other countries that have banned crypto include Egypt and Bolivia.
Many countries allow bitcoin and cryptocurrencies in some capacity, though most are operating in a gray area. The quick rise of the crypto market has not been accompanied by steady regulation. It is only in the past 12 months or so that countries have begun examining regulation.
Instead of proposing bans, nations like South Korea have created legal frameworks to ensure that no illicit activity takes place. Their decisions include creating a tax scheme and mandating that exchanges register.