Government to regulate digital, virtual assets and cryptocurrencies

In an attempt to control the misuse of virtual assets and virtual currencies like bitcoin, the Securities and Exchange Commission of Pakistan (SECP) has issued a regulatory framework to monitor and regulate any digital and virtual assets owned in Pakistan.

The SECP has issued a document on the regulation of Digital Asset Trading Platforms in Pakistan. They aim to support financial inclusion efforts and any advancements made in the technological world with regards to currency in a safe and responsible manner; any misuse, unethical or illegal behaviour is what they aim to eradicate altogether.

Digital/Virtual Assets, according to the SECP are the start of this new digital finance era but because digital fraud could be done in countless ways, appropriate regulatory measures need to be put in place. This demands that new and innovative regulatory measures be thought up and enforced by the relevant authorities.

On a global scale, a unanimous consensus has not yet been reached as to what the term Digital Assets means. This is because different governments across the globe have emphasised and worked more on different aspects of the field; some have deemed the operation of these assets more important than the regulations while for some it is the opposite.

The SECP, however has said that regulation of these assets is pertinent. This is bearing in mind that the global market value of digital assets exceeds EUR 7 billion, approximately 1.3 trillion Pakistani Rupees.

The driving four factors for the policies regarding these assets should, according to the SECP, be:

• They are a form of innovation that can impact the financial sector of the country
• They cannot be regulated under the current framework
• They may create conditions for regulatory arbitrage, and they may pose risks
• There needs to be an increase in interest, investment, and participation in digital assets.

The SECP has talked about various approaches to regulate these assets such as regulating and restricting new products or simply following a let-things-happen/do-not-harm approach. They have also gone onto to explain the two types of digital assets (Utility Token and Security Token) in the document.

A lot must be done before the government gets these policies of digital assets just right. The realisation of the need for regulations, however, is a sure step in the right directions towards protecting the assets of the Pakistani people.