SBP Explains Legal Status Of Virtual Assets, Crypto in Pakistan

Yesterday, Special Assistant to the Prime Minister on Crypto and Blockchain, Bilal Bin Saqib, announced Pakistan’s government-backed strategic Bitcoin reserves. In a NA meeting, it came up that crypto is still not regulated in Pakistan in any way. This sparked a conversation among people, raising questions about its legality in Pakistan, which was again cleared by the SBP today.

The legal status of virtual assets (VAs) in Pakistan is currently evolving, as clarified by the State Bank of Pakistan (SBP). Contrary to some interpretations, virtual assets were not declared illegal in Pakistan. Instead, the SBP, in 2018, issued an advisory to its regulated entities, which include banks, Development Finance Institutions (DFIs), Microfinance Banks (MFBs), Electronic Money Institutions (EMIs), Payment System Operators (PSOs), Payment Service Providers (PSPs), and Exchange Companies.

The core reason for this advisory was the absence of a comprehensive legal and regulatory framework for virtual assets within the country. The SBP’s primary objective was to safeguard its regulated financial institutions and their customers from the inherent risks associated with an unregulated environment. These risks typically include money laundering, terrorist financing, consumer protection issues, and financial stability concerns due to its volatile nature.

Currently, significant efforts are underway to address this regulatory gap. The SBP and the Finance Division are actively collaborating with the Pakistan Crypto Council, focusing on developing an appropriate regulatory framework for virtual assets in Pakistan.

State Bank of Pakistan announced that the legal and regulatory framework is expected to bring much-needed clarity and legal recognition to virtual assets. This will, in turn, provide essential consumer and investor protection, which is a key concern in the largely unregulated global crypto market. A well-defined framework would aim to, clearly categorize and define what constitutes a virtual asset under Pakistani law. It will take care of its licensing and registration and introduce measures to protect consumers from fraud, scams, and market manipulation.