A cryptocurrency is an electronic cash system working on a peer-to-peer basis to facilitate the transfer of funds between users without a financial intermediary or central repository. These types of virtual currencies are unregulated and are not backed by any government. Their rapid growth presents a challenge to governments around the world, given that the wide acceptance of cryptocurrencies has the potential to disrupt regulated payment systems and affect the implementation of monetary policy. Moreover, because they promote anonymity, these currencies can be used for unlawful purposes.
Scope of Cryptocurrencies in Pakistan:
There does not appear to be any specific law that regulates cryptocurrencies or the trade-in cryptocurrencies in Pakistan. In May 2017, the State Bank of Pakistan (SBP) stated that it does not recognize digital currencies. On April 6, 2018, the SBP issued a press release cautioning the general public on the risk of virtual currencies. According to some news reports; The Federal Board of Revenue (FBR) “is currently investigating the traders of digital currencies for tax evasion and money laundering,” Moreover, the Federal Investigation Agency (FIA) has “launched operations against the people dealing in the cryptocurrencies,” according to a news report on February 10, 2018
The General Public is advised by the State Bank of Pakistan that Virtual Currencies/ Coins/ Tokens (like Bitcoin, Litecoin, Pakcoin, OneCoin, DasCoin, Pay Diamond etc.) are neither recognized as a Legal Tender nor has SBP authorized or licensed any individual or entity for the issuance, sale, purchase, exchange or investment in any such Virtual Currencies/ Coins/ Tokens in Pakistan. Further, Banks/ DFIs/ Microfinance Banks and Payment System Operators (PSOs)/ Payment Service Providers (PSPs) have been advised not to facilitate their customers/account holders to transact in Virtual Currencies/ Initial Coin Offerings (ICOs) /Tokens vide BPRD’s Circular No. 03 of 2018. State Bank did not recognize these currencies because of their considerable risks to consumers were also cited and listed as:
- High volatility in price, primarily driven by speculation.
- The risk of loss posed by the failure or closure by regulators of cryptocurrency exchanges.
- The risk of loss posed by security breaches of cryptocurrency exchanges and wallets.
- High incidence of fraudulent and Ponzi schemes involving cryptocurrencies offered to Pakistani consumers.
However, in my opinion, blockchain technology and Bitcoin can play a crucial role in Pakistan in bringing millions of people into a formal financial structure. Pakistan’s National Financial Inclusion Strategy should pay increased focus on this.
Importance of Cryptocurrencies in Pakistan
- They help to complement existing services that now rely on standard currencies, as seen in M-Pesa in Kenya, where every 1 in 3 Kenyans now owns a Bitcoin Wallet. Investing in cryptocurrencies can be risky, so the investor or every country should first do much research to stay from the risks.
- It encourages exchange free of regulatory meddling and promotes what is referred to as low-cost banking because it can be done anywhere as long as the consumer has access to a cellphone. By proper laws, regulations and proper check and balance, Pakistan can deal with these digital currencies.
- There aren’t usually transactions fees for cryptocurrency exchange because the network compensates the miners.
- The cryptocurrency market is usually available to trade 24 hours a day, seven days a week because there is no centralized governance of the market.
- When you buy a cryptocurrency, you are purchasing the asset upfront in the hope that it increases in value. However, when you trade on the price of a cryptocurrency, you can take advantage of markets that are falling in price and rising. This is known as going short.
- It is a secure, trustful and transparent digital money to deal with, and the world is generally moving towards that since cryptocurrency is digital and cannot be counterfeited or received arbitrarity by the sender as with credit card chargeback.
- It makes a transaction highly non-disclosure or anonymous, which appeals to consumers who prefer non-disclosure and privacy.