KARACHI: As the State Bank of Pakistan (SBP) has banned investment and trading in cryptocurrencies in the country, experts caution money can be used in rather more mysterious and dangerous ways that will dodge the blockchain technology which keeps track of virtual currency transactions in a transparent and secure manner.
“It is a sad day indeed. A truly innovative system has been blocked,” commented Danyal Manzar, CEO of Urdubit.com, while referring to the central bank’s restriction on cryptocurrencies placed on April 6, a day after neighbouring India took a similar measure.
Urdubit, the first and only bitcoin exchange in Pakistan, has also posted a shut-down notice on its website.
So far, Pakistan had not played a significant role in the virtual currency market as people were just beginning to enter the arena, Manzar said in an email response to queries sent by The Express Tribune.
“I don’t think more than 100 different virtual coins a day were being traded across all mediums,” he said. “The decision was made in haste; ample time should always be provided for a proper shutdown; but we respect the SBP’s decision.”
The decision was so abrupt that customers of Urdubit.com could not get back their funds that they had invested in cryptocurrencies. To the contrary, India gave three-month time to bitcoin exchanges for winding up their operations.
“Some people still have bitcoins stuck in Urdubit and they email it time and again for withdrawal,” Manzar said.
He believes that those who want to trade will continue to do so because alternative ways still exist that will continue to be tapped no matter how risky they are.
He was of the view that cryptocurrencies would only disrupt the stock market, and not the entire monetary system, as about 80% to 85% of the traders from stock exchanges came to try their luck in virtual currency.
“Cryptocurrencies will definitely be going to be legal tender in the near future as soon as the government finds the opportunities and addresses the initial regulatory concerns,” remarked Nahas A Jaleel, who participated in the Oxford Blockchain Strategy Programme at Said Business School, University of Oxford.
Elaborating on the blockchain technology, he said “all transactions are stored in a block. Whenever a new transaction occurs, the current blocks are never updated, but a new block is created and is linked with the previous block.”
Under the system, he said, nobody could corrupt it by changing the old record without permission from everyone in the network.
Experts believe that people who want to invest in cryptocurrencies will eventually find alternative means without confronting the government.
“Banning or not banning makes no difference for the time being as there are no means to track people who want to trade in cryptocurrencies,” said Parvez Iftikhar, an information and communication technology (ICT) expert.
Some are of the opinion that cryptocurrencies will lose their credibility over time because of their volatility and vulnerability to cyberattacks.
“In a year or two, cryptocurrencies will lose their credibility,” said Dr Amit Lakhanpal, the author of “The World of Crypto Currency” who leads the Al Kasir Group that recently announced its foray into crypto assets.
“Evolution in the era of cryptocurrencies will lead us to better usage of blockchain,” he said.
Pakistan has reasons to be concerned about the new technology as the Financial Action Task Force (FATF) is going to put the country on the terror finance watch list in June.
However, experts suggest that the government should devise a system to track down and curb any malicious activities and strictly regulate the system. Japan, the Philippines, US, UK and some others have already regulated the trade in cryptocurrencies.
“If you have a proper Know Your Customer (KYC) system and regulated exchanges like most countries have, you can trace the transactions,” said Manzar of Urdubit.com.
Published in The Express Tribune, May 13th, 2018.