FinMin raises alarm over unregulated digital deals
Federal Finance Minister Muhammad Aurangzeb
Finance Minister Muhammad Aurangzeb warned on Saturday that Pakistan risks slipping back to the grey list of Financial Action Task Force due to unregulated digital transactions being carried out by roughly 15% of the population, seeking to put in place a transparent regulatory regime.
"If certain level of activity is happening and happening at this scale, it's only a question of when, not if, that we are going to get into trouble as a country, as a sovereign again," said Senator Aurangzeb while speaking at the workshop on the Leadership Summit on Block chain and Digital Assets: Technology and Innovation.
The minister added that in terms of know your customer (KYC) and anti-money laundering sanctions, Pakistan exited the grey list after six years with great difficulty and this (digital transactions) cannot be a reason to go back there.
His statement came two days before the government convened the maiden meeting of the Pakistan Virtual Assets Regulatory Authority (PVARA), which will be held on Monday. The session will review key policy items and discuss how to move forward with a regulatory framework, stated the minister.
Aurangzeb shared that over 25 million people or 10-15% of the country's population, especially youth, is involved in digital businesses and this cannot be ignored. In this context, Aurangzeb said that the increased activity has to be regulated due to the danger of international sanctions.
The digital transactions are so far illegal in Pakistan and the amendments related to declaring digital currencies legal are pending for the approval of the federal cabinet. Prime Minister Shehbaz Sharif has constituted a committee to further review these amendments, particularly the proposal to allow dual nationals to become the deputy governors of the central bank.
Aurangzeb stressed the need for Pakistan to accelerate its adoption of blockchain, artificial intelligence (AI), cryptocurrency, and Web 3.0 technologies to strengthen the country's digital economy.
The finance minister said the world has already made progress in this space, and Pakistan must not lag behind. "We have been very blessed in terms of getting some international collaborations and international success transfers. We don't need to start from ground zero and use those templates and see whether it works for Pakistan or not."
"We have to accelerate our journey in terms of the new economy, and the ministry stands ready to assist," he added.
The finance minister noted that the country's economy is moving in the right direction and highlighted Pakistan's successful exit from the FATF grey list, while urging greater transparency in digital transactions.
The minister said that there is an offensive element, an economic element and there is a defensive element from a regulatory point of view, which the government would look at.
Aurangzeb said that from next week the parliamentary standing committees would start discussing the Virtual Assets Ordinance, which the government had promulgated a few weeks ago to establish an independent regulator for virtual assets and crypto currencies.
Under the ordinance, the government has established "the Pakistan Virtual Asset Regulatory Authority (PVARA), which is an autonomous federal body empowered to license, regulate and supervise entities dealing in virtual assets".
The PVARA is based on ad-hoc legislation, which will expire in four months and can be extended by another four months. To give it permanency, both the houses of the Parliament have to pass the PVARA Act.
The authority has been granted comprehensive powers to ensure transparency, compliance, financial integrity and the prevention of illicit activities in alignment with international standards, including those of the FATF.
Under the ordinance, any person or company intending to offer virtual asset services in or from Pakistan must be licensed by the PVARA. A structured licensing regime will be introduced, with specific requirements for incorporation, operational capacity, compliance frameworks and reporting obligations, the statement added.
The ordinance also incorporated a framework for responsible innovation by establishing a regulatory sandbox, allowing emerging technologies and business models to be tested under supervisory oversight. "Technology is all about being faster, cheaper and better. If blockchain, AI, crypto and Web 3.0 can, in the context of the economy, deliver that for Pakistan, that is what we are collectively shooting for," he said.