Bitcoin? No thanks

SBP in a circular says it has not authorised or licensed any individual or entity in respect of cryptocurrency trading


Editorial April 08, 2018

Cryptocurrencies have had a brief and eventful life thus far, and it is too early to say whether they are to be a fixture of financial life. It is a peer-to-peer electronic cash system that does not exist in the real world, only in cyberspace. It is a system of electronic transactions that unlike traditional banking practice do not rely on trust, and the bitcoin network came into existence with the first open-source bitcoin client on January 2009. Since then, there has been a proliferation in terms of currency trading and the diversity of cryptocurrency products.

Trading is low in Pakistan but the State Bank of Pakistan (SBP) has decided to move in early in the life of the use of cryptocurrency in the country and banned outright all cryptocurrencies including Bitcoin, Litecoin and Pakcoin as well as a number of others all of whose tokens are now illegal. The SBP in a circular says it has not authorised or licensed any individual or entity in respect of cryptocurrency trading, and they are not legal tender issued or guaranteed by the government. All cryptocurrency trading is henceforward to be reported to the Financial Monitoring Unit as a suspicious transaction.

Although this may appear to be a sledgehammer to crack a walnut we would support the SBP erring — if indeed it has — on the side of caution. Traditional banking has a system of secrecy that stretches back to the Middle Ages but it requires intermediaries, which cryptocurrencies do not. They allow individuals in effect to become their own banks as they hold their own private keys. It is not difficult to see the attraction in Pakistan for those wishing to evade their tax liabilities or move money connected to terrorism. There is currently no regulatory body for cryptocurrencies — which by their very nature are hard to regulate anyway because they are decentralised — and shutting the stable door before the financial horse makes a bolt for it is a prudent proactive move. This is not to say that cryoptocurrency does not have a place in Pakistan but until there is appropriate regulation extreme caution in advised.

Published in The Express Tribune, April 8th, 2018.

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COMMENTS (1)

Mr. Murtaza Shah | 5 years ago | Reply This stupid author needs to know that crypto currency enables pakistani consumers to purchase and transact openly in the international market without begging to payment processors such as PayPal, which openly refuses to provide services to pakistani market.
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