State Bank of Pakistan warns against trade in digital currencies

KARACHI: The State Bank of Pakistan (SBP) issued a warning, intimating public and all the concerned about potential risks of trade in virtual currencies.

According to the SBP, “Virtual Currencies like Bitcoin, Litecoin, Pakcoin, OneCoin, DasCoin, Pay Diamond etc. or Initial Coin Offerings (ICO) tokens are not legal tender, issued or guaranteed by the Government of Pakistan. SBP has not authorized or licensed any individual or entity for the issuance, sale, purchase, exchange or investment in any such Virtual Currencies/Coins/Tokens in Pakistan.”

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warned the general public as well as banks against trade in virtual currencies, informing them that no legal protection was available against risks involved in the unlicensed business.

Virtual currencies (popular among them is Bitcoin) are neither recognised as a legal tender nor the SBP has authorised or licensed any individual or entity for the issuance, sale, purchase, exchange or investment in any such virtual currencies, coins and tokens in Pakistan, according to the SBP.

The SBP further says: “In view of the foregoing, all Banks/ DFIs/ Microfinance Banks and Payment System Operators (PSOs)/Payment Service Providers (PSPs) are advised to refrain from processing, using, trading, holding, transferring value, promoting and investing in Virtual Currencies/Tokens. Further, banks/DFIs/Microfinance Banks and PSOs/PSPs will not facilitate their customers/account holders to transact in VCs/ICO Tokens. Any transaction in this regard shall immediately be reported to Financial Monitoring Unit (FMU) as a suspicious transaction.”

SBP elucidates that no data is available about prevalence of virtual currencies in Pakistan. According to reports, the exact volume of trade in virtual currency in Pakistan is not known, but many people believed it could be around tens of billions of rupees. However, it could not be independently verified.

Virtual currency is created from computer code, which is unregulated digital or electronic money. Unlike a real-world unit such as the US dollar or euro, it has no central bank and is not backed by any government and is controlled by its developers.

The reports quoting SBP as saying that virtual currencies such as coins and tokens provided high degree of anonymity and could be potentially used for facilitating illegal activities. The central bank advised banks, development finance institutions, microfinance banks and payment system operators and payment service providers not to facilitate transactions of their customers and account holders in virtual currencies.

In Pakistan, fraudsters offer investment schemes and coins and promising high returns (similar to Ponzi schemes) to the people, the SBP said, warning that this could cause a significant loss to the general public.

Besides, investors can’t buy anything from virtual currencies because of its remittance issu. By and large, in most countries, the acceptance of bitcoins is low and people are purely buying it out of speculation and not with the intention of using it as a tool to transact.