As cryptocurrencies become more common currency, countries are faced with the issues of having to impose rules and regulations in order to avoid the more unsavory aspects of the cryptocurrency market to take hold.
Bitcoin regulation around the world
South Korea was one of the first countries to impose strict regulations on cryptocurrencies like Bitcoin, in order to avoid illegal activities being carried out using blockchain technology.
The European Union has bounced around the idea of regulating cryptocurrencies, but now some are suggesting that it should quite simply be made illegal for banks and financial institutions to hold and trade in Bitcoin and other cryptos.
In the more economically liberal US, policy makers are still debating what to do with the cryptocurrency market, and some are debating government regulation whilst others advocate for self-regulation.
China, by comparison, have not only imposed very strict regulations on cryptocurrencies, but are not also considering banning ICOs completely.
Now the turn has come to Pakistan
Already last year, the country attempted to crack down on illegal trade using cryptocurrencies by investigating businesses and confiscating laptops and mobile devices as evidence. However, no arrests were made back in August 2017.
This is set to change now.
The Prevention of Electronic Crimes Act will soon include the trade of Bitcoin, and official documents reveal the following:
“Bitcoin / digital currency is not recognized by State Bank of Pakistan as legitimate business and are causing huge monetary loss to the government exchequer. So it should be declared illegal with the inclusion of definition and distinct punishment of this emerging crime.”
The rise and fall of cryptos in Pakistan
Although cryptocurrencies have enjoyed a success in Pakistan similar to that in other countries, this new approach could spell the end of the digital coins like Pakcoin – Pakistan’s premier cryptocurrency.
One of main reasons for this is that Pakistan’s economy is not seen as being as stable as that of many OECD countries, which means that the volatile nature of cryptocurrencies could destabilise the entire economy if not handled properly and in good time.
The State Bank of Pakistan has now issued a very clear statement of its intentions regarding the trading of cryptocurrencies in the country, in a paper titled ‘Caution regarding risks of virtual currencies’:
Virtual Currencies/Coins/Tokens provide high degree of anonymity and potentially can be used for facilitating illegal activities. Also due to the ambiguous nature of Virtual Currencies, no legal protection or recourse is available to any individual in the event of a loss incurred due to any or all of the following risks:
a) High price volatility as investments tied to Virtual Currencies are highly unstable and are primarily based on speculations;
b) Failure/closure of Virtual Currency exchanges/businesses due to any reason including action by law enforcement agencies; and
c) Hacking/security compromises of crypto currency exchanges and wallet businesses as a number of instances have been recorded around the world where huge amount of funds have been lost due to the exchange/wallet operations being hacked/compromised.
Further, Fraudsters are also offering pyramid style investment schemes and coins and promising high returns (similar to Ponzi schemes) to the general public in Pakistan. This can cause significant loss to the General Public.
What do you think of this move from the Pakistani government? Leave your comments below!