In line with a previous warning, Pakistan has taken the decision to impose a stringent ban on internet-based crypto services. According to a report from local news outlet ProPakistani on Wednesday, Pasha, speaking during a session of the Senate Standing Committee on Finance and Revenue on May 16, confirmed that the country will prohibit online cryptocurrency services within the country and will not reverse this course of action.
This move garnered support from other officials, including Sohail Jawad, the Director of the State Bank of Pakistan (SBP). Pasha affirmed that the government will indefinitely deny legal status to cryptocurrencies in the country.
Reports regarding the proposal by the central bank and the federal government were first published by local media outlets on January 12, 2022. Notably, this was the first public stance taken by the State Bank of Pakistan regarding the crypto asset class. In October 2020, the Sindh High Court had previously urged the government to regulate digital currencies.
Salim Mandviwala, chairman of the committee, pointed out that Pakistani citizens had invested billions of dollars into cryptocurrencies. In December of the previous year, the Federation of Pakistan Chambers of Commerce and Industry reported that Pakistanis had invested $20 billion in 2021.
Pasha emphasized that the ban on cryptocurrencies was one of the conditions imposed by the Financial Action Task Force (FATF) for removing Pakistan from its gray list in October. The gray list includes countries that the organization identifies as having deficiencies in the areas of Anti-Money Laundering and Counter-Terrorism Financing.
The ban is expected to result in exchanges ceasing their official operations in the country. However, citizens may still be able to access crypto services through unofficial channels, such as virtual private networks (VPNs).
Pakistan In Economic Crisis
Pakistan is currently facing a severe economic crisis, with an inflation rate of 36.4% as of April. While this rate is not significantly higher than the global average, it is the highest figure the country has experienced since the mid-1970s.
Over the past 25 years, the country’s debt has been doubling approximately every five years, reaching Rs. 62.5 trillion by the end of the Imran Khan government in 2022. Meanwhile, GDP growth has been sluggish, failing to keep up with the increasing debt burden.
The unsustainable level of debt has resulted in debt servicing obligations surpassing the federal government’s revenue in the fiscal year 2022-23. This economic crisis has also triggered a political standoff between Prime Minister Shahbaz Sharif and former Prime Minister Imran Khan. Consequently, Khan was removed from office, leading to nationwide unrest and calls for early elections.