In a recent development, Pakistan has declared that it will be imposing regulations on the digital currencies as per the recommendations suggested by the FATF (Financial Action Task Force). These regulations are said to come into effect on an immediate basis.
A Well-known Reluctance to Cryptocurrency
Crypto enthusiasts the world over know the fact that earlier too Pakistan had been reluctant to accept the digital currency transactions. The country had issued a warning through its central bank to all the other banks as well as financial service providers to not offer cryptocurrency transaction services.
Last year in April, the State Bank of Pakistan had posted a tweet reminding the public the fact that the entity regulates and oversees all the international as well as domestic money transfers and payments. The tweet showcased the tough stand against cryptocurrency usage.
CAUTION REGARDING RISKS OF VIRTUAL CURRENCIES
General Public is advised that domestic and international payment and money transfer services in Pakistan are regulated by SBP under the applicable laws.
— SBP (@StateBank_Pak) April 6, 2018
However, even after incorporating FATF recommendations to prevent terrorism funding, money laundering and tax evasion, Pakistan had no choice except to approve digital currency usage well within the nation’s borders so that the crypto funds’ flow can easily be monitored.
Deployment of EMIs Regulations
It has been learned that the SBP is about to launch regulations for the Electronic Money Institutions to administer digital currencies. As per the sources, these regulations would help in fighting cases of money laundering in addition to terror funds. At the same time, it would also help in regulating cryptocurrency throughout the nation.
FATF has given its approval to Pakistan for its attempts to fight money laundering instances and terrorism funding. Previously, Pakistan’s laws were not efficient to combat both these problems which had landed it a spot in the grey list of FATF.
FATF’s report with reference to virtual currencies alerted stating,
“..characteristics of virtual currencies, coupled with their global reach, present potential AML/CFT risks, such as the anonymity provided by the trade in virtual currencies on the internet, the limited identification and verification of participants, the lack of clarity regarding the responsibility for AML/CFT compliance, supervision and enforcement for these transactions that are segmented across several countries, [and] the lack of a central oversight body.”
The Present Scenario
In order to bring virtual currencies into an equivalent regulatory framework like the traditional e-money transfer practices, the Pakistan government needs to accept its legitimacy, including of those cryptocurrencies that are not issued by the state.
Furthermore, the EMIs would require to abide by the regulations for the receipt and maintenance of their licenses. As the FATF had particularly identified virtual currency as a threat in terms of terror funding as well as money laundering, Pakistan authorities eager to follow FATF regulations only had an option to incorporate virtual currency regulations.
The regulations were announced to be launched on 1st April at SBP office at Islamabad in the presence of Asad Umar, Yonus Dhaga and Tariq Bajwa, Federal Finance Minister, finance secretary, and SBP governor, respectively.