State Bank of Pakistan (SBP) has warned the general public against using virtual currencies/coins/tokens such as Bitcoin, Litecoin, Pakcoin, OneCoin, DasCoin, Pay Diamond, etc. on Friday. Any person found using virtual currencies/coins/tokens for the purpose of transferring money outside Pakistan will be subject to prosecution as per applicable laws.
The central bank also asked commercial and microfinance banks, as well as Payment System Operators (PSOs)/ Payment Service Providers (PSPs) to avoid facilitating their customers/account holders who want to carry out transactions in the form of virtual Currencies/Initial Coin Offerings (ICOs) /tokens.
SBP’s circular says that these cryptocurrencies are neither recognized as a “Legal Tender” nor has SBP authorized or licensed any individual or entity for the issuance, sale, purchase, exchange or investment in any such virtual currencies/coins/tokens in Pakistan.
“Virtual currencies/coins/tokens provide a high degree of anonymity and can be potentially used for facilitating illegal activities.”
“Also due to the ambiguous nature of Virtual Currencies, no legal protection or recourse is available to any individual,” the circular added.
Why Has SBP Banned Cryptocurrencies?
The ban on cryptocurrencies has been issued in light of the following risks:
- High price volatility as investments tied to virtual currencies are highly unstable and are primarily based on speculations;
- Failure/closure of virtual currency exchanges/businesses due to any reason including action by law enforcement agencies; and
- Hacking/security compromises of cryptocurrency exchanges and wallet businesses, as a number of instances have been recorded around the world where a huge amount of funds have been lost due to the exchange/wallet operations being hacked/compromised.
Furthermore, fraudsters have also started offering pyramid style investment schemes and coins, promising high returns (similar to Ponzi schemes) to the general public in Pakistan. SBP believes that this can cause significant losses to the general public.
General public is advised that domestic and international payment and money transfer services in Pakistan are regulated by SBP under applicable laws. In this regard, no entity is currently licensed or authorized by SBP to offer money remittance services and products in Pakistan using virtual currencies/coins/tokens.
In view of the above, the general public, in their own interest, is advised to be cautious of and refrain from indulging in activities relating to mining, trading, exchanging, transferring value, promoting and investing of virtual currencies/coins/tokens to avoid potential financial loss and legal implications.