After a long history of rejecting the technology, Pakistan is now moving to legalize cryptocurrency and the blockchain. In 2023, Pakistan was one of the many countries with a hardline policy on crypto use and blockchain technology.
Aisha Ghaus Pasha, the country's Minister of State for Finance and Revenue, even publicly stated that “they will never legalize” crypto in the country.
Today, this policy is about to change with the Pakistani government approving a proposed amendment to its State Bank of Pakistan (SBP) Act, allowing the state's chief bank to issue its first digital currency.
Pakistan's Major Policy Shift On Crypto
Tea Express Tribune reports that government sources have signaled a policy shift by the current administration. Plans to modify the SBP Act, one objective of which is to allow the state bank to add a digital currency, are now in place.
The SBP has been consistent in its policy to reject the adoption of a digital currency and has consistently published warnings on its use and promotion. Under the current proposal, the government and traditional financial institutions can add a digital currency.
The idea is to promote a central bank that can manage the country's finances physically and digitally.
Pakistan And Its History Of Crypto Prohibition
Pakistan's state bank has traditionally led the opposition against cryptocurrency use, arguing against its volatility and difficulty in regulation.
In 2018, Pakistan's SBP issued an order banning banks and other financial institutions from providing services to crypto exchanges or handling crypto-related transactions. The 2018 order specified that popular cryptocurrencies like Ether and Bitcoin are not legal tender in Pakistan.
In the same order, the country's chief finance policymakers explained that since cryptos offer a high degree of anonymity, bad actors can use these for illicit activities. Because of this SBP order, cryptocurrency activities in Pakistan were limited, preventing crypto exchanges from conducting business.
Banning Crypto To Avoid 'Grey List'
The government's initial reluctance to approve cryptocurrencies for transactions is connected to the conditions imposed by the Financial Action Task Force (FATF).
According to the task force, Pakistan will not be included in its “grey list” if it does not legalize cryptocurrencies like Bitcoin. With this order, the state banks have issued orders to local banks and financial institutions to inform their customers. In addition, remittances from foreign exchanges are also not allowed since they're illegal and risky.
If the proposal passes, the government will file amendments to Section 24, which focuses on issuing, regulating, and managing digital currencies. Under the SBP Act, only the SBP of Pakistan can issue a digital currency and make it a legal tender.
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