Cryptocurrency in Pakistan: Is it Legal or Illegal? - 24justice.pk (2024)

Cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies are decentralized and do not require third-party intermediaries like banks or governments to facilitate transactions. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.

Cryptocurrency is still a new concept in Pakistan, and not many are very familiar with it. There is a lot of confusion surrounding the legal status of cryptocurrency in Pakistan. The government has not yet issued any official regulations or laws regarding cryptocurrency. However, the State Bank of Pakistan (SBP) issued a warning to the public about the risks associated with investing in cryptocurrency in 2018.

Crypto – A digital currency

As of early 2022, there are over 10,000 different cryptocurrencies in existence. This number has been growing rapidly in recent years, as new coins are created, and others are discontinued. While the majority of these coins have very small market caps, a handful have become quite popular and have sizable followings. The most well-known cryptocurrency, Bitcoin, currently has a market cap of over $1 trillion. Ethereum, the second largest coin by market cap, is also quite popular and has a market cap of around $200 billion.

Other major coins include Tether, Ripple, Litecoin, and Bitcoin Cash. There are also many smaller coins with more niche uses that have gained popularity among certain groups of users. With such a large and ever-growing number of options available, it can be difficult to keep track of all the different cryptocurrencies. However, as the industry continues to mature, the number of coins in circulation will likely begin to stabilize.

2018’s State Bank Notice to the General Public

The State Bank in 2018 advised people to refrain from indulging in activities relating to mining, trading, exchanging, transferring value, promoting, and investing in Virtual Currencies/Coins/Tokens. They also shared the following risks associated with indulging in activities relating to mining, trading, exchanging, transferring value, promoting, and investing in Virtual Currencies/Coins/Tokens:

• High price volatility: Cryptocurrencies are highly volatile and can fluctuate rapidly. This makes them risky investments.
• Failure/closure of exchanges: If a cryptocurrency exchange were to fail or close down, investors could lose all their money.
• Hacking/security compromises: Cryptocurrency exchanges and wallets have been subject to hacking in the past, which has led to investors losing large sums of money.

Enter Waqar Zaka in 2020

Waqar Zaka, a well-known Pakistani television personality and entrepreneur, filed a petition in the Sindh High Court (SHC) against the State Bank of Pakistan’s (SBP) notification about the restriction on the use of cryptocurrency.

The petition was filed after the SBP issued a notice in 2018, warning people against investing in or trading cryptocurrencies such as Bitcoin, Ethereum, Litecoin, etc. The notice said that cryptocurrencies are not recognized as legal tender in Pakistan and cautioned people against the risks associated with them, such as potential financial losses, cyber-security risks, and money laundering.

However, Waqar Zaka argued that the SBP does not have the authority to ban cryptocurrency trading or mining as it is not mentioned in the Pakistani laws. He pointed out that the Parliament of Pakistan has not passed any law banning cryptocurrency trading or mining, and therefore, the SBP’s notification is illegal.

Waqar Zaka also stated in his petition that the FIA’s Cyber Crime Wing had been allegedly illegally arresting crypto miners and confiscating their Bitcoins worth millions. He said that the FIA officers filed an FIR against the miners even though there are no sections for cryptocurrency in the Pakistani laws. In 2020, it was then concluded that cryptocurrency is neither legal nor illegal in Pakistan.

March 2022 When Mr. Baqir Said that Cryptocurrency is of “No Good Use”

State Bank of Pakistan (SBP) Governor Reza Baqir, while speaking at a panel discussion at the 13th Karachi Literature Festival, said that cryptocurrency is a useful technology and has the potential to solve a lot of problems that the world is currently facing. However, “when we look at the value proposition offered by crypto right now, the use cases that have been brought forward have just been exchanges,”he said while explaining that people wanted the regulator to allow Bitcoin use.

“Every new thing has some benefits and some risks. It’s a policymaker’s job, in particular, to make a judgment whether the benefits outweigh the risks with regards to the use of cryptocurrencies in Pakistan,” he added.

While raising the concern of lack of visibility regarding virtual transactions, Mr. Baqir said, “There is no way that the regulator or a law enforcement agency has visibility on who is doing transactions and for what purpose. And, therefore, around the world, there is a lot of misuses [of cryptocurrency], including human rights violations, trafficking of people, money laundering and many other things.”

Mr. Bakir, while concluding his argument, said “In Pakistan, we as the central bank have concluded as of now that, for us and in terms of the core objectives of the central bank, the potential risks far outweigh the benefits.”

Pros of Cryptocurrency

While talking about the legal status of cryptocurrency in Pakistan, it’s essential to take a look at the pros and cons of digital currency.

Cryptocurrencies offer a lot of advantages over traditional fiat currencies. Here are a few:

• Anonymity
  • There are many reasons why people choose to use cryptocurrency, and one of the main ones is anonymity. With traditional currency, your transactions can be traced back to you, but with crypto, they’re completely anonymous. This makes it an excellent choice for those who value their privacy.
• Accessibility
  • Another great thing about cryptocurrency is that it is accessible to everyone. Unlike traditional investments, which can be out of reach for many people, cryptocurrency is open to anyone with an internet connection.
• Liquidity
  • Another big plus for cryptocurrency is its liquidity. Unlike some investments, which can tie up your money for years, you can cash out your crypto holdings at any time. This makes it a great option for people who need or want to access their money quickly.
• Independence From Central Authority
  • As we all know, traditional fiat currency is managed by central authorities, such as governments and banks. However, cryptocurrency is different. It is self-governed and managed. That means there is no central authority controlling it. Instead, the entire network of cryptocurrency users manages it. This decentralized structure has many advantages.
• Exchangeability
  • This means that, theoretically, anyone can send or receive payments without having to go through a third party. This could potentially make cryptocurrency a very attractive option for those who are looking for an alternative to traditional banking systems.
• Independent
  • For one thing, it makes cryptocurrency much more resilient to external interference or manipulation. Since there is no central authority controlling it, no single entity can make decisions that would adversely affect the whole network. This also makes cryptocurrency much less susceptible to fraud or theft.
• Protection from Inflation
  • Another benefit of cryptocurrency is that it can help protect you from inflation. Inflation occurs when the value of a currency declines over time. This means that the purchasing power of that currency decreases. For example, if you have $100 and the inflation rate is 5%, then your $100 will only be worth $95 in a year.
  • This is because there is a finite supply of coins that can be produced, and as demand increases, the value of each coin also increases. This helps to keep pace with the market and prevent inflation in the long run. Cryptocurrency is also becoming increasingly popular as a means of investment, which further adds to its value.
• High Return Potential
  • One of the main reasons why people invest in cryptocurrency is because of the high return potential. While the prices of cryptocurrencies can be highly volatile, they have the potential to increase dramatically in a short period.
  • For instance, in March 2017, Bitcoin was priced at $975.70, and within a few months, it spiked to $20,089 in December. A couple of years later, the price of Bitcoin reached an all-time high of $64,000 in April 2021. While there is always the risk that prices could crash just as quickly as they spike, investors who are willing to take on this risk can potentially make a lot of money by investing in cryptocurrency.

Cons of Cryptocurrency

Investing in cryptocurrencies comes with several risks. Here are some of the key cons to consider before investing:

• Volatility
  • One of the biggest cons of cryptocurrency is that it is incredibly volatile. For example, Bitcoin swings by more than 3% on average every single day. While this volatility can be exciting for some investors, it can also be very risky. If you’re not careful, you could end up losing a lot of money very quickly.
• Lack of Government Regulation
  • Another con is the lack of government regulation. Cryptocurrency is not currently regulated by any government or financial institution. This means that there is no one overseeing the market or setting rules and guidelines for how it should operate. This can make it very risky to invest in, as there is no guarantee that your money will be safe. Additionally, if something goes wrong with a transaction or you have a dispute with another user, there is no one to turn to for help.
• Irreversible
  • Cryptocurrency transactions are irreversible. This means that once you make a transaction, there is no way to cancel or reverse it. This can be problematic if you send money to the wrong person or if you are scammed. There is also no chargeback option with cryptocurrency, so you will not be able to get your money back if something goes wrong.
• Limited Use
  • Another con of cryptocurrency is that it’s not widely accepted. Even though there are a growing number of companies that accept Bitcoin, such as Microsoft and some Subway franchises, it’s still not universally accepted. This means that you may not be able to use your cryptocurrency to buy goods and services from all businesses.

Countries Where Bitcoin Is Banned

As of January 2022, Bitcoin was banned in the following countries:

• Algeria
• Bolivia
• Bangladesh
• Dominican Republic
• Ghana
• Nepal
• The Republic of Macedonia
• Qatar
• Vanuatu

Countries Where Bitcoin Is Legally Restricted

As of January 2022, Bitcoin was legally restricted in the following countries:

• Bahrain
• China
• Hong Kong
• Kazakhstan
• Russia
• Saudi Arabia
• Turkey
• Vietnam

Countries Where Bitcoin Is Legal

As of January 2022, Bitcoin was considered legal in the following countries:

• Antigua and Barbuda
• Australia
• Barbados
• Belgium
• Bulgaria
• Cayman Islands
• Chile
• Croatia
• Dominica
• Estonia
• Finland
• Germany
• Indonesia
• Italy
• Ireland
• Japan
• Lithuania
• Malta
• Mauritius
• Marshall Islands
• New Zealand
• Norway
• Philippines
• Serbia
• South Korea
• Sweden
• Switzerland
• Ukraine
• United Kingdom
• United Arab Emirates
• United States
• Uzbekistan
• Venezuela

Countries Where Bitcoin Is Neither Legal Nor Illegal

As of January 2022, Bitcoin was considered neither legal nor illegal in the following countries:

• Albania
• Afghanistan
• Angola
• Anguilla
• Argentina
• Belize
• British Virgin Islands
• Brunei
• Cambodia
• Costa Rica
• Cuba
• Guatemala
• Haiti
• India
• Honduras
• Kenya
• Jamaica
• Latvia
• Lesotho
• Macau
• Malaysia
• Mexico
• Moldova
• Montenegro
• Tajikistan
• Zimbabwe

Parting Ways

The bottom line is that the legality of cryptocurrency in Pakistan is still up in the air. The government has yet to make a definitive statement on the matter, which means that for now, it remains neither legal nor illegal. However, there is some risk involved with investing in cryptocurrency. You should always consult with a financial advisor before making any investment decisions.

But that doesn’t mean that cryptocurrency is all bad. The future of cryptocurrency looks promising as analysts estimate that the global cryptocurrency market will more than triple by 2030, hitting a valuation of nearly $5 billion.

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