SBP blocks bid to legalise digital currencies
One of the most encouraging signs comes from right here in Pakistan. Bilal bin Saqib, recently appointed as the Chief Advisor to the Pakistan Crypto Council, is a name to watch. photo: Reuters
The State Bank of Pakistan (SBP) has blocked a move to immediately declare digital currencies as legal in the country, cautioning that allowing transactions without a regulatory framework could create serious challenges.
At its maiden meeting on Monday, the board of the Pakistan Virtual Assets Regulatory Authority (PVARA) sought to withdraw existing orders that prohibit the use of cryptocurrencies.
However, officials said the SBP opposed the proposal, stressing that premature approval would be problematic without a legal and licensing structure in place.
The meeting was chaired by Special Assistant to the Prime Minister on Blockchain and Crypto, Bilal bin Saqib, and attended by Finance Minister Muhammad Aurangzeb. Although not a member of the board, Aurangzeb joined deliberations as a special invitee.
The SBP governor, federal secretaries of IT and Law, the FBR chairman, the SECP chairman and representatives from the National Cyber Crime Investigation Agency (NCCIA) were also in attendance.
According to a Finance Ministry statement, "The Board deliberated on the withdrawal of BPRD Circular No. 3 of 2018, issued by the State Bank of Pakistan, which had directed financial institutions to refrain from dealing in virtual currencies and tokens".
The 2018 instructions not only declared dealings in cryptocurrencies illegal but also required banks to report such transactions as suspicious to the Financial Monitoring Unit (FMU).
The circular stated that digital currencies such as Bitcoin, Litecoin, Pakcoin, OneCoin, DasCoin, Pay Diamond, or ICO tokens were not legal tender and were neither issued nor guaranteed by the government. It further clarified that the SBP had not authorised any entity to issue, trade or invest in such assets in Pakistan.
The directive binds all banks, development financial institutions, microfinance banks, payment system operators and payment service providers to refrain from processing, using, holding, promoting, or investing in cryptocurrencies.
The central bank's circular further directed the financial institutions against facilitating their customers and account holders to transact in these currencies, asserting that any transaction in this regard shall immediately be reported to the FMU as a suspicious transaction.
During Monday's session, sources said the SBP governor opposed lifting the ban, arguing that withdrawal of the circular without a proper framework could create serious problems.
Under an ad-hoc legislation, 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.
Some of the participants of the meeting were of the view that it may take six to eight months to put in place an effective regulatory and licensing regime, said the sources.
Last Saturday, Finance Minister Muhammad Aurangzeb warned that Pakistan risks slipping back onto the grey list of the Financial Action Task Force due to unregulated digital transactions being carried out by roughly 15% of the population.
"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 last week
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 Ministry of Finance's handout stated that the Pakistan Virtual Assets Regulatory Authority's first board meeting was attended by Muhammad Aurangzeb as a special invitee, the governor of the SBP, federal secretaries of the ministries of Information Technology and Law and Justice, Chairman of the Federal Board of Revenue, Chairman of the Securities and Exchange Commission of Pakistan and representatives from the National Cyber Crime Investigation Agency (NCCIA).
It added that the board approved the creation of a complaint portal, developed in collaboration with the National Cyber Crime Investigation Agency (NCCIA), to address concerns related to virtual assets and provide timely redressal.
The finance minister emphasized the authority's critical role in positioning Pakistan as a leader in the global virtual assets economy.
The press note added that the board deliberated on key priorities, including operationalizing PVARA to align with international Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) standards, recommending independent directors with expertise in virtual assets for approval, and establishing the Authority's core framework.
The board agreed to form dedicated committees focused on sandbox experimentation, taxation policies, regulatory drafting, and international engagement. A draft of the proposed licensing framework was also shared with the members for consultation, which will be finalised in the coming days.
Additionally, PVARA will hold bi-monthly meetings for the first six months to ensure robust feedback and stakeholder consultation.
Chairman Bilal bin Saqib remarked that the PVARA will safeguard financial integrity while fostering innovation, investment, and opportunity in the virtual assets space. "Our goal is to build trust domestically and enhance Pakistan's credibility as a forward-thinking player in the global virtual assets' economy," he added.