File photo. Karen Bleier—AFP
Constituted by Sindh High Court under supervision of State Bank of Pakistan, panel claims crypto trading can facilitate illicit funds transfer, outflow of foreign exchange
A committee constituted under the supervision of the State Bank of Pakistan (SBP) deputy governor by the Sindh High Court (SHC) has recommended a total ban on cryptocurrency in Pakistan in a report it submitted on Wednesday.
Comprising officials of the ministries of finance and information technology, and the Pakistan Telecommunication Authority and Security and Exchange Commission of Pakistan, the committee was tasked with determining whether cryptocurrency and its trading was permitted under Pakistani law. In its report, it recommended a complete ban on all cryptocurrency and related activities in the country, claiming that its analysis showed that the risks of cryptocurrencies outweighed their benefits for Pakistan.
The committee claimed that cryptocurrency trading in Pakistan was mostly speculative, with people being encouraged to invest for short term capital gains. Such activities, the committee claimed, could facilitate the transfer of illicit funds from the country, as well as boost the outflow of foreign exchange.
In addition to banning cryptocurrency, the committee has also suggested a ban on unauthorized operations of exchanges such as Binance and OctaFx, adding that proportionate and dissuasive penalties should be imposed on them by the federal government. The report noted that several countries, including China and Turkey, had already banned cryptocurrency, while Japan, Australia, New Zealand and several other countries treated it as assets or legal property, and Russia and Dubai considered it a taxable property and had introduced a regulatory framework to use it as investment tokens.
Petitioner Waqar Zaka, who was also part of the committee, has opposed the recommendations, maintaining that a SBP directive for banks to refrain from investing in virtual currencies violates Articles 4 (no person shall be compelled to do that which the law does not require them to do) and 18 (freedom of trade and business) of the Constitution.
During Wednesday’s hearing, a two-judge SHC division bench, headed by Justice Mohammad Karim Khan Agha, directed the committee to forward copies of its report to the ministries of finance and law, directing them to examine its recommendations and provide a final decision on whether cryptocurrency was to be allowed in Pakistan and, if so, under what regulatory framework. It noted that cryptocurrency traders in Pakistan were already facing difficulty, as they were reportedly being targeted by the Federal Investigation Agency.
The court directed the secretary finance and secretary law, or other senior officers, to appear in person and file their response on April 11.