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Monday, June 1, 2020

State Bank Bans Cryptocurrencies in Pakistan

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State Bank Bans Cryptocurrencies in Pakistan

Offshore Banking

The central bank also requested commercial and microfinance banks, in addition to Payment Method Operators (PSOs)/ Payment Service Providers (PSPs) to prevent easing their customers/account holders that wish to execute transactions in the kind of virtual Currencies/Initial Coin Offerings (ICOs) /exemptions.

SBP’s circular claims these cryptocurrencies are known as a “Legal Counsel” nor has SBP licensed or licensed any person or entity for the issuance, purchase, buy, investment or exchange in such a digital currencies/coins/tokens at Pakistan.

“Virtual currencies/coins/tokens provide a high degree of anonymity and can be potentially used for facilitating illegal activities.”

“Additionally because of the ambiguous nature of Virtual Futures, no legal protection or protection can be available to any person,” the circular added.

Why Has SBP Banned Cryptocurrencies?

The ban on cryptocurrencies has been issued in light of the following risks:

  • High price volatility as investments tied to virtual currencies are highly unstable and are primarily based on speculations;
  • Failure/closure of virtual currency exchanges/businesses due to any reason including action by law enforcement agencies; and
  • Hacking/security compromises of cryptocurrency exchanges and wallet businesses, as a number of instances have been recorded around the world where a huge amount of funds have been lost due to the exchange/wallet operations being hacked/compromised.

SBP in Pakistan

What’s more, fraudsters also have begun offering pyramid design investment strategies and coins, promising high returns (like Ponzi schemes) to the general public in Pakistan. SBP considers that this may cause substantial losses to the public

General public is advised that national and global payment and money transfer services in Pakistan are governed by SBP under related laws. In this aspect, nothing is now licensed or approved by SBP to provide money remittance products and services in Pakistan utilizing virtual currencies/coins/tokens.

In light of the above mentioned, the general public, in their own interest, is advised to be more wary of and refrain from indulging in actions concerning mining, trading, exchanging, transferring worth, investing and promoting in virtual currencies/coins/tokens to prevent possible financial loss and legal consequences.

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