In a recent development, the government of Pakistan has taken a firm stand against cryptocurrencies, declaring that they will never be legalized in the country. Minister of State for Finance and Revenue, Aisha Ghaus Pasha, made this announcement during a session with the Senate Standing Committee on Finance. This decision comes at a time when Pakistan is facing a volatile political situation and a devaluing national currency, the Pakistani rupee.
According to local reports, Minister Pasha cited the Financial Action Task Force (FATF) as one of the reasons for the ban on cryptocurrencies. The FATF, an international finance watchdog, has set conditions that require countries to refrain from legalizing cryptocurrencies to avoid being placed on its "Grey List." Pakistan's stance is in line with these conditions imposed by the FATF.
To enforce this ban, the State Bank of Pakistan (SBP) and the Information Technology Ministry have been instructed to work on the necessary measures. This move follows the SBP's earlier declaration in January 2022, where it expressed its intention to ban cryptocurrencies, providing the first clear position on this emerging financial technology.
CoinDesk has reported that banks in Pakistan have already started informing customers about the illegality of cryptocurrency trading. Messages from these banks indicate that any remittance of foreign exchange for crypto trading through payment channels is not permitted by the SBP and is considered illegal and risky. In addition, Dawn newspaper reported that banks have officially warned customers against using debit or credit cards for crypto trading.
Despite the ban, cryptocurrencies are gaining popularity in Pakistan. The annual trading volume for Pakistan-based wallets has witnessed significant growth, reaching $25 billion, up from $18-20 billion the previous year, according to Zeeshan Ahmed, the country general manager at Rain Financial, a Gulf-based cryptocurrency trading platform.
The ban on cryptocurrencies comes at a time when Pakistan is grappling with political turmoil. Former Prime Minister Imran Khan was recently arrested on corruption allegations but was subsequently released by the Supreme Court. Khan is now in a tense standoff with the police at his residence in Lahore, leading to widespread protests in the country.
The political and financial instability has prompted retailers in Pakistan to turn to cryptocurrencies as a hedge against the devaluing Pakistani rupee. Many individuals are converting their salaries into stablecoins, which are cryptocurrencies pegged to stable assets like the US dollar. This provides a means for them to preserve their wealth amidst concerns of a potential sovereign default and the government's struggle to secure support from the International Monetary Fund.
Ali Farid Khwaja, chairman of KTrade Securities and CEO of BlockTech Pakistan, suggests that individuals are using stablecoins like Tether (USDT) as a way to gain exposure to the US dollar. Even Bitcoin has performed well against the Pakistani rupee, attracting a significant number of Pakistani investors. During the crypto bull run, over 20 million Pakistanis reportedly opened accounts on cryptocurrency platforms.
Bilal Bin Saqib, a blockchain investor, highlights that the Pakistani rupee has experienced a staggering 57.4% depreciation against the US dollar in the past year. For most people in Pakistan, stablecoins have emerged as a convenient method to access the US dollar, as physical dollar acquisition is hindered by import restrictions imposed by the government.
In conclusion, Pakistan's recent ban on cryptocurrencies has intensified the country's stance against digital assets. The government's decision is driven by compliance with FATF regulations, as well as concerns about financial instability and the devaluation of the national currency. However, despite the ban, the popularity of cryptocurrencies as a hedge against the devaluing Pakistani rupee continues to grow.
