The use of cryptocurrency became much more popular nearing the end of last year, particularly due to the booming price of bitcoin in 2017. Despite virtual currencies being in-demand, their usage in Pakistan has been insignificant when compared with other countries such as the U.S.
The State Bank of Pakistan has now issued a circular on its website prohibiting the issuance, purchase, sale, investment or exchange of any virtual currencies or initial coin offerings (ICO) in Pakistan.
The bank has reiterated that no entity has been authorized for dealing in any form of cryptocurrency, such as bitcoin, Pakcoin, Litecoin, and more. Furthermore, all banks have been specifically advised to avoid investing in these currencies, with the bank noting:
In view of the foregoing, all Banks/ DFIs/ Microfinance Banks and Payment System Operators (PSOs)/Payment Service Providers (PSPs) are advised to refrain from processing, using, trading, holding, transferring value, promoting and investing in Virtual Currencies/Tokens. Further, banks/DFIs/Microfinance Banks and PSOs/PSPs will not facilitate their customers/account holders to transact in VCs/ICO Tokens.
In addition, any transaction of cryptocurrencies will be reported as suspicious, with legal action being taken by the Financial Monitoring Unit (FMU) against any individual involved.
Presumably, the ban has been initiated due to highly volatile prices of such currencies - which incidentally is also one of the reasons Steam ended support for them back in December. Similarly, the security of cryptocurrency exchanges has been compromised a number of times; cybercriminals took advantage of the crypto mining craze last year, earning millions through malicious miner distribution. Moreover, 600 bitcoin mining servers have been stolen in Iceland in recent months.
Bitcoin value currently stands at around $6,900, significantly lower than what it was priced at just a few months ago. With major firms such as Twitter and Google banning cryptocurrency ads from their platforms, and now Pakistan banning any usage of virtual currencies, it will be interesting to see whether other countries follow suit. It should be noted, however, that the State Bank of Pakistan is not the first bank to ban cryptocurrency, with the Lloyd Banking Group having prohibited bitcoin purchase with credit cards a couple of months ago.