To solidify its stance against cryptocurrencies, Pakistan has imposed a comprehensive ban on crypto services, bringing to fruition a promise made earlier. The state’s Minister of Finance and Revenue, Aisha Ghaus Pasha, delivered a strong message, stating that cryptocurrencies will not gain legal status in the country, now or in the future.
Nationwide Ban on Online Crypto Services
Following the threat hinted at months ago, Pakistan’s decision to prohibit crypto services conducted over the Internet has now become effective. This decision was revealed during a session of the Senate Standing Committee on Finance and Revenue, as reported by ProPakistani on May 16.
Further adding weight to the move, the ban received backing from various officials, including Sohail Jawad, Director of the State Bank of Pakistan (SBP). The government’s commitment to deny cryptocurrency legal status in Pakistan is unwavering and long-term.
The State Bank’s viewpoint on the crypto asset class, being made public for the first time, was first reported by local media on January 12, 2022, heralding a new and challenging era for digital currencies in the country.
Cryptocurrency: A Billion-Dollar Industry in Pakistan
The ban came when the populace grew interested in digital currencies. Per the committee chairman, Salim Mandviwala, Pakistanis had invested billions of dollars into cryptocurrencies.
In 2021 alone, the Federation of Pakistan Chambers of Commerce and Industry highlighted investments worth a staggering $20 billion made by Pakistanis.
A significant factor contributing to the ban is the conditions set forth by the Financial Action Task Force (FATF). The international body required the ban on cryptocurrency as a prerequisite to delisting Pakistan from its ‘gray list,’ a collection of countries considered to have deficiencies in their Anti-Money Laundering and Counter-Terrorism Financing strategies.
Countries often adopt measures like strict Know-Your-Customer procedures to avoid the dishonor of being blacklisted or graylisted. Yet satisfying the FATF is no easy feat.
Future of Crypto Exchanges and Unofficial Channels
The comprehensive ban will likely compel crypto exchanges to halt their official operations in Pakistan. However, individuals are expected to seek alternative methods to access crypto services, such as VPNs.
The ban’s timing coincides with an ongoing economic crisis in Pakistan, with an inflation rate of 36.4% as of April. This figure is not an outlier on the global stage but is the highest for the country since the mid-1970s.
Growing Financial Turmoil In Pakistan
Pakistan’s debt has seen an alarming surge in recent years, roughly doubling every five years over the past quarter-century. By the end of the Imran Khan government in 2022, it had skyrocketed to Rs. 62.5 trillion. Coupled with sluggish GDP growth, this unsustainable debt burden led to debt servicing obligations surpassing federal government revenue in the fiscal year 2022-23.
The economic turmoil played a part in the political deadlock between Prime Minister Shahbaz Sharif and former Prime Minister Imran Khan, causing national unrest and calls for early elections. Despite attempts to secure an IMF loan, the Khan government failed to curb inflation or improve the economic scenario, fueling the fire.
In light of these challenges, the crypto ban is one facet of the larger narrative of Pakistan’s struggle to stabilize its economy while maintaining a firm grip on financial regulation.
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