Friday, December 9, 2022

Pakistan Central Bank Order Banks Not to Touch Cryptocurrency Businesses

Pakistan Central Bank Order Banks Not to Touch Cryptocurrency Businesses

Pakistan’s central bank, the State Bank of Pakistan (SBP), has issued a statement banning banks and other financial institutions from serving crypto related businesses. The move from the SBP comes a day after neighboring India released a similar statement. The SBP also highlighted that cryptocurrencies are not legal tender in the country.

Also see: Roger Ver Suggests Buterin Wrong About CSW, Buterin Responds

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Pakistan Crypto Exchanges Winding up Operations

Pakistan entered the crypto market late, and the volume of trade in the country is not substantial at this time. Moreover, digital currencies’ acceptance at the merchant level is trifling. Although it may not affect many, some crypto exchanges have announced to shutter their operations due to the warning.

In accordance with the SBP statement, no individual is authorized “for the issuance, sale, purchase, exchange or investment” of such digital tokens. The cautionary announcement also stated that any individual using virtual currencies to send money out of the country will face prosecution.

How the authorities could enforce such an export ban is unclear, unless they intend to ban cryptocurrency use altogether.

Following the announcement, the country’s first cryptocurrency exchange Urdubit announced it would cease operations and have requested its users withdraw their money at the earliest opportunity.

Urdubit’s Facebook statement read “Due to the current stance on Virtual Currencies by SBP we will be closing doors. Please withdraw your funds as soon as possible”

Pakistan flag

Pakistan Follows India’s Footsteps

According to a circular issued by the Central Bank of Pakistan, digital currencies like bitcoin, litecoin, and others are not a legal tender and are not backed by the government. Additionally, no entity is authorized by the government to purchase, exchange or issue digital tokens.

Last month, Pakistan’s Federal Investigation Agency (FIA) initiated operations against individuals dealing in cryptocurrencies.

The warnings reflect those from other central banks around the world that started around the end of 2013, the time of bitcoin’s first bull run to $1,200 USD that gained massive mainstream attention. National banks have continued to issue the warnings ever since.

Pakistan’s circular also divulged:

“In view of the foregoing, all Banks/ DFIs/ Microfinance Banks and Payment System Operators (PSOs)/Payment Service Providers (PSPs) are advised to refrain from processing, using, trading, holding, transferring value, promoting and investing in Virtual Currencies/Tokens. Further, banks/DFIs/Microfinance Banks and PSOs/PSPs will not facilitate their customers/account holders to transact in VCs/ICO Tokens. Any transaction in this regard shall immediately be reported to Financial Monitoring Unit (FMU) as a suspicious transaction.”

The Pakistan crypto market is smaller in volume compared to India. The Central Bank of India’s decisions to restrict all entities regulated by them from providing services to crypto related businesses has caused cracks in the crypto market. The BTC value on local exchanges dipped to as low as $5,250.

Indian crypto exchanges are planning to counter government’s vague approach before India’s High Court.

Are such government decisions dictatorial and biased? Let us know your views in the comments section.

Images via Pixabay

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