KARACHI/ ISLAMABAD: A committee formed by the Sindh High Court last year on Wednesday submitted a report before the court recommending a “complete ban” on all cryptocurrencies in the country, officials with direct knowledge of the document said.
Last year, the Sindh High Court ordered the government to form a high-level committee to review the legal status of cryptocurrencies. The order came as part of a hearing in a petition demanding that the court declare null and void a State Bank of Pakistan order dated April 6, 2018, in which it advised banks and payment system operators to “refrain from processing, using, trading, holding, transferring value, promoting and investing in virtual currencies/tokens.”
An official at the central bank — who declined to be identified as the report submitted before the court has not yet been made public — told Arab News the committee identified several risks related to cryptocurrency and made two recommendations to the bank.
“A complete ban on all cryptocurrencies and other related activities in the country,” the bank recommended in a report seen by Arab News. “Unauthorized operations of crypto exchanges to be banned and penalties be imposed by the federal government.”
A second central bank official also confirmed that the report submitted with the Sindh High Court had recommended a ban on cryptocurrencies.
Among the risks of cryptocurrencies, the committee said regulators had not yet sufficiently addressed the phenomenon of cryptocurrencies or settled on a collective approach on the innovation.
The central bank also has concerns over the trading of cryptocurrency by individuals and entities “as it results in outflow of foreign exchanges from the country.”
Consumer protection and lack of legal resource was another concern, the committee noted, saying it was “highly likely that price volatility [would] expose its holders to huge monetary losses.”
The committee also said there was a risk of enforcement due to multiple jurisdiction: “Cryptocurrencies are borderless and there anonymous and pseudonymous nature increases the difficulty of implementing the regulatory and monitoring tools for regulating entity.”
The committee noted that a number of frauds had been reported recently in cryptocurrency exchanges and the investigation and seizure of the assets in the decentralized system had proved difficult.
The committee’s recommendations come amid a $100 million scandal in Pakistan in which Binance, a cryptocurrency exchange which is the largest exchange in the world in terms of daily trading volume of cryptocurrencies, is believed to have swindled thousands of clients.