The State Bank of Pakistan (SBP) has issued a circular on the “prohibition of dealing in virtual currencies”. The measure comes right after a similar move by the central bank of neighboring India. Commercial banks and payment providers have been told to stay away from crypto operations. They should not facilitate transactions of virtual currencies and tokens, the document states.
Bitcoin, Pakcoin, Onecoin… Deemed Illegal
Pakistan’s central bank says virtual currencies like Bitcoin, Litecoin, Pakcoin, Onecoin, Dascoin, Pay Diamond, and tokens from initial coin offerings are not legal tender in the country. These are not guaranteed by the Government of Pakistan, the financial institution notes. SBP has not authorized any individual or entity to issue, sell, purchase, or exchange any such virtual currencies and coins in Pakistan, according to circular No. 03 published on the bank’s website.
No dedicated legislation regarding cryptocurrencies has been adopted in the country yet. Authorities, however, have demonstrated negative attitude towards bitcoin on many occasions. The Federal Investigation Agency, which has conducted several operations against cryptocurrency traders, recently called on the government in Islamabad to declare digital currencies “persona non grata”.
In accordance with the promulgated stance, all banks, microfinance entities, payment system operators and service providers are “advised to refrain” from dealing in cryptocurrencies. That includes the “processing, using, trading, holding, transferring, and investing” in digital coins. SBP also says that banks and companies should not facilitate crypto transactions of their customers and account holders.
Pakistani banks have been asked to “immediately” report any such transaction to the Financial Monitoring Unit (FMU). All crypto transactions have been called “suspicious”. The circular letter is signed by the State Bank’s director Muhammad Akhtar Javed, who asks the banks to acknowledge receipt.
According to Pakistani media, SBP has also warned citizens against using cryptocurrencies to transfer money abroad. Any person doing that will be subject to prosecution. Domestic and international transfer services are regulated by the central bank in Pakistan. It notes that no entity is authorized to offer cryptocurrency remittance services. Pakistanis have been advised not to engage in activities like mining, trading, and promoting virtual currencies.
In the Footsteps of India
The prohibition of crypto-related transactions has been reported as a “major development” by the local press. It follows a similar decision by the Reserve Bank of India. RBU ordered regulated financial institutions in the country to terminate all services to individuals and businesses dealing with cryptocurrencies like bitcoin.
The statement issued by India’s central bank effectively prohibits banks from working with intermediaries such as cryptocurrency exchanges. Major commercial banks, however, had been tightening the clamp even before the order. Citibank, ICICI Bank, HDFC Bank, Kotak Mahindra Bank, and the State Bank of India, have all suspended accounts of crypto traders without a mandate from the central bank. As a result, bitcoin trading on local exchanges has dropped as much as 90% in the last two months, as news.Bitcoin.com reported.
According to Indian media, RBI’s tough stance, amid continuing regulatory uncertainty, is forcing Indian exchanges to look for jurisdictions with clearer policies, like Australia. Trading platforms are also trying to actively respond to the latest challenge. An online petition calls for the reversal of the bank’s decision. A campaign on Twitter has been gathering support under the hashtag #RBICantStopMe.
Much like India, Pakistan has seen an increased interest in cryptocurrencies since last year when the market capitalization of bitcoin and the like reached all-time highs. However, the local crypto sector is not as developed as in other countries, including India.