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Cryptocurrency

Pakistan’s financial watchdog plans cryptocurrency regulation

  • The Securities and Exchange Commission of Pakistan published a document regarding cryptocurrency regulation.
  • The document defined various types of cryptocurrencies and described various crypto regulations
  • The SECP believes Pakistan needs a “do-not-harm” approach towards crypto regulation.

Pakistan’s financial watchdog, the Securities and Exchange Commission of Pakistan (SECP) has published a “Position Paper” discussing the cryptocurrency regulation in the country.

SECP wants to introduce cryptocurrency regulation to begin a new era of digital finance for the country.

Position Paper

Published on November 6, the document discusses the nation’s growing digital finance sector and also studies the various crypto regulations across the globe.

SECP introduces digital assets as the start of a new era of digital finance. In order to facilitate the growth of the sector, it is necessary to re-invent the regulatory measures that are being employed by regulators across the world today.

The Position Paper only discusses cryptocurrencey regulation and does not mention a central bank digital currency.

The Position Paper can act as the foundation to the country’s digital asset regulations. The paper defines the various types of virtual assets being used across the globe. The document discussed cryptocurrencies in a positive light especially the utility and security tokens.

The document describes Utility tokens as tokens that have a specific purpose and are generally used within the platform they are developed for. Security tokens on the other hand include assets providing rights such as ownership or shares in future profit of the fundtion. Furthermore, tokenization of physical assets on distributed ledger technology (DLT) holds several potential advantages over the traditional system.

The SECP stated that the security tokens lower investment barriers by fractionalizing each asset. Furthermore, digital assets based on DLT provide a high level of transparency, high liquidity and greater efficiency.

Pakistan’s approach towards cryptocurrency regulation

The State Bank of Pakistan (SBP) recently clarified that it has not banned cryptocurrencies. While the bank admittedly issued a warning about interacting with digital assets, the bank did not ban them. The bank had issued the warning back in 2018 but the bank’s stance towards cryptocurrencies seems to have changed since.

In April 2019, the Finance, Revenue and Economic Affairs Minister of Pakistan Asad Umar stated that the country will launch a digital currency by 2020. Umar has since stepped down from the position but the government is still taking a keen interest in cryptocurrencies.

The recently published document states that the country’s approach towards cryptocurrency regulation should not harm innovation. The SECp believes that the Commodity Futures Trading Commission’s (CFTC) “do-not-harm” approach is ideal for stimulating the growth of the cryptocurrency sector.

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