All recommendations are ultimately forwarded to the committee, which is chaired by the Secretary of Finance. Pakistan could consider a blanket ban on crypto transactions or strong legal control over the industry. From Elon Musk`s tweets to Dogecoin to Snoop Dogg and Madonna`s NFTs, the global cryptocurrency boom and the wider blockchain space are making headlines in most Western countries. It is therefore ironic that the country with the third largest acceptance of cryptos (according to the Chainalysis 2021 Global Crypto Index) – Pakistan – has no regulations allowing it to maintain and expand the domain based on its existing adoption. In fact, research conducted by the Federation of Pakistan Chambers of Commerce and Industry shows that Pakistanis held more than $20 billion in cryptocurrencies in 2020-2021. A figure that exceeds the country`s total foreign exchange reserves. The Pakistani government and its central bank want to ban the use of cryptocurrencies, local media reported, citing a document submitted to a provincial court. Second, regulation of cryptos is necessary for the state to benefit from the taxation of crypto income. More and more people will trade cryptos or touch the crypto ecosystem in any way, and the treasury that doesn`t benefit from these profits seems to be a massively missed opportunity in a country where tax collection is otherwise a major challenge. If we can go further and Pakistan can allow favorable corporate taxation on cryptocurrencies, Pakistan could become a hub in the region, attracting organizations built on blockchain or using cryptocurrencies, thus encouraging new foreign direct investment. Third, for a country where the size of its foreign exchange reserves has been a concern for most of its recent history, the ecosystem with a regulated crypto could enable an increase in remittances using many newer blockchains, offering negligible transaction fees and near-instant cross-border payments.
This could increase the amount and frequency of foreign remittances. who enter the country. Fourth, crypto regulation can be used to reduce capital flight. As the Pakistani rupee collapses against the US dollar, cryptos can provide a secure but legal store of value that prevents capital outflows. Finally, on a more holistic level, Pakistan has a rare, albeit fleeting, chance to be at the forefront of the next technological revolution by adopting and regulating cryptocurrencies. «I don`t think Pakistan has decided to ban it,» said Faisal Aftab, co-founder of Zayn Capital. «I think they`re still researching regulation. The ambiguity is whether Pakistan will consider cryptocurrencies as an asset.
But it is almost clear that it is not considered legal tender. These three subcommittees, which have been set up, will help the Pakistani government decide whether or not to ban the digital asset. The state-owned SBP will issue licences to EMEs for the issuance of CBDCs. At the announcement, Finance Minister Asad Umar said using EMEs to boost the digital economy would protect financial institutions from cybersecurity threats. SBP Deputy Governor Jameel Ahmad plans to tackle decree-induced corruption and inefficiency caused by CBDCs. Pakistan is one of the fastest growing economies with a 65% increase in youth, rapid technological adaptation and a government that is trying to put in place a business-friendly legal framework. The latest data from Sensor Tower shows that Binance, KuCoin, Crypto Blockfolio, OKeX and major cryptocurrency exchanges in Pakistan are among the Android and iOS users. These exchanges have not taken any proactive steps to take advantage of this huge opportunity of the sixth most populous country with the third highest global adoption rate of crypto. Most exchanges operate through phantom partners with no regulatory overhead. Up to a thousand Pakistani traders are listed on cryptocurrency exchanges outside of Pakistan. Localbitcoins.com is one of the leading platforms for crypto exchanges, facilitating the majority of Pakistanis. This is the first time the central bank has taken a clear position, according to media reports.
The inclusion of government and regulatory representatives on the committee gives the report additional powers as a reflection of possible policy initiatives. In 2018, SBP issued a circular prohibiting banks from dealing with cryptocurrency exchanges. India`s RBI Reserve Bank is reportedly finalising the preparation of the pilot project for retail digital rupees, which will initially be tested with 10,000 to 50,000 users at participating banks. The case was filed by Waqar Zaka, a TV host and crypto entrepreneur, who wanted the court to rule that cryptocurrencies be declared legal because a large number of Pakistanis are interested in them. The country has the third highest crypto adoption rate in the world, according to the Chainalysis Global Crypto Adoption Index. Dr. Reza Baqir, former governor of the State Bank of Pakistan (SBP), said in March that the dangers of using cryptocurrency outweighed the benefits. Earlier, the central bank issued an official advisory warning the public to be cautious and avoid trading cryptocurrencies. The committee submitted the report to the Sindh High Court, which heard a case on digital currencies and ordered its formation. He raised concerns about the use of cryptography for money laundering and terrorist financing.
The introduction of cryptocurrencies has begun to gain prominence in the country. For the first time, Pakistan ranks third in Chainalysis` 2021 Global Crypto Adoption Index. Plans for cryptocurrency mining farms were announced earlier this year by Khyber Pakhtunkhwa province. At the federal level, a committee has been set up to deal with the regulation of cryptocurrencies. These are encouraging signs. However, there is still much to be done, and there is only a short window of opportunity to do so. Bitcoin and cryptocurrency mining flourished in Pakistan until April 2018, when the government banned the trading and mining of virtual currencies. The mining industry is still growing, although many mining farms have been closed since the ban was introduced. Bitcoin mining pools such as ViaBTC, Braiins, and Slush Pool have seen an increase in the number of people mining Bitcoin and other cryptocurrencies at home due to the ban. The cryptocurrency market is highly volatile, and due to its high volatility, we have seen a lot of hesitation on the part of businesses, regulators, and consumers to adopt the asset.
There is no doubt that cryptocurrencies are a high-risk asset class, which is why more and more exchanges are thriving in countries with adverse circumstances. Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws governing this activity. In Israel, for example, crypto mining is treated as a business and is subject to corporate income tax. Regulatory uncertainty remains in India and elsewhere, although Canada and the United States are relatively supportive of cryptocurrency mining. Mr. Zeeshan Ahmed explained that the exchange is an important crypto trading platform in the markets in which it already operates. The estimated volume of crypto transactions in 2021 was nearly $100 billion. «Our share was $2 billion.
As a regional player, we are currently ready to become a global player,» he said. The Pakistani government has formed committees that will help it decide the future of the cryptocurrency industry. The second committee will adopt recommendations based on whether or not a ban is imposed and the impact it could have on the country`s technological progress.