Crypto Regulations in Pakistan in 2024
Crypto Regulations in Pakistan in 2024

Cryptocurrency is on top in Pakistan! With its growing acceptance, the government realized the need to regulate it. Pakistan is one of the emerging markets in Southeast Asia with a population of approximately 250 million people. The country’s population is mostly below the poverty line and people are hopeful that good times are coming. Meanwhile, Bitcoin adoption has increased in Pakistan even without a regulated exchange in place. Due to the widespread adoption of cryptocurrency in Pakistan, crypto regulations seem necessary in the region.

In this Coinpedia report, we will reveal the crypto regulatory scenario in Pakistan in 2024.

Crypto Acceptance in Pakistan

The adoption of crypto, including Bitcoin, has increased significantly in Pakistan, although there is no existing regulatory framework here. People use peer-to-peer services like Binance, Paxful and other OTC trading methods in Pakistan. In 2020, the Securities and Exchange Commission of Pakistan (SECP) published a document citing potential approaches to crypto regulation in the country. The State Bank of Pakistan has issued a public notice stating that cryptocurrencies are neither recognized as legal tender nor has SBP authorized or licensed any individual or entity to issue or operate virtual currencies.

  • Pakistan ranks sixth in the global crypto adoption index, and Pakistan’s crypto market is estimated at $18-25 billion despite regulatory challenges.
  • Bitcoin’s adoption can also be explained by the fact that it has an annual inflation rate of over 25% and has been worsening for the past few years amid political turmoil.
  • There is potential for mass adoption of cryptocurrencies in Pakistan. The country is one of the emerging markets in Southeast Asia!
  • The existence of communities like “Bitcoin Pakistan” suggests that the nation has crypto enthusiasts who embrace the crypto revolution willingly.
  • Cryptocurrencies like Bitcoin are not officially regulated in Pakistan, but it is not illegal.
  • As of January 16, 2021, the State Bank of Pakistan has not authorized individuals or organizations to sell, buy, exchange and invest in virtual currencies, coins and tokens. There have been a number of arrests by the cybercrime wing of the Federal Investigation Agency (FIA) related to the mining of Bitcoin and other cryptocurrencies. The arrests were made on charges of money laundering.
  • Despite the many controversies surrounding virtual currencies, prominent Pakistani bloggers and social media influencers are publicly involved in bitcoin trading and regularly post content in favor of cryptocurrency regulation.
  • In December 2020, the government of Khyber Pakhtunkhwa became the first province in Pakistan to pass a resolution to legalize cryptocurrency in the country.
  • In May 2023, Pakistan announced a ban on crypto and blockchain related activities. It wanted to prevent illegal digital currency transactions and comply with the Financial Action Task Force (FATF). This was partly in response to concerns about terrorist financing and money laundering.
  • The government of Pakistan announced that crypto will never be legal in the country in May 2023. The SBP first revealed its plan to ban crypto in January 2022.
  • Pakistan’s finance minister has reportedly said that crypto cannot be legalized in the nation due to conditions set by global money laundering watchdog FATF.

As we know blockchain based and crypto related activities are not supported in Pakistan by regulatory agencies. The latest ban criticizes several crypto-related activities. Let’s take a look at the legal status of the following cryptocurrencies:

Bitcoin Forbidden/Illegal
NFT Illegal
Mine Illegal
Commerce Illegal
DeFi Allowed

Taxation

There is currently no tax on owning or trading crypto assets in Pakistan! However, there were a few suggestions.

The FPCCI has proposed a tax on converting crypto to Pakistani rupees, a 5% tax on cashing in crypto held as deposits in foreign currency accounts, and a 10% tax on cashing in crypto held as deposits in Roshan digital accounts. Under the proposed law, crypto profits are chargeable under Section 37A of the Income Tax Ordinance 2001 and must be classified as “securities”, a 15% tax on crypto trading profits is introduced.

  • The proposed law covers a 15% tax rate on profits from the sale of crypto, a 5% tax on withdrawals and deposits in foreign currency accounts, and a 10% tax on crypto assets that are withdrawn and stored in Roshan digital accounts.

Future prospects and challenges

According to our research, the main factor that affects the crypto scenario in Pakistan is that its principles contradict those of Islam, as it is an element of uncertainty. Since there are no central authorities or intermediaries, opportunities for fraud exist. The high volatility of crypto is also classified as “gharar” (uncertainty) in the Islamic financial system.

Pakistan is doing well in terms of crypto adoption despite the illegal status. Crypto enthusiasts explore new opportunities related to cryptocurrency. Debates and discussions are still going on in Pakistan regarding the legalization of crypto. We are optimistic for a better crypto approach from the Pakistani government in the future.

Conclusion

The recent crypto adoption report shows that Bitcoin adoption in Pakistan has increased significantly even without any regulatory framework. People use peer-to-peer services like Binance and other OTC trading methods to acquire Bitcoin in Pakistan. The country ranks among the top countries in terms of Bitcoin adoption among emerging markets in the developing world. The regulatory framework is evolving gradually in Pakistan as adoption gathers pace!

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