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Cryptocurrency: An Overview and Legal Landscape in Pakistan

Cryptocurrency, a digital form of currency based on cryptographic technology, has garnered significant attention worldwide in recent years. Its decentralized and secure nature has revolutionized traditional financial systems. The rise of crypto assets, including cryptocurrencies like Bitcoin and stablecoins like USD Tether, has been driven by factors such as low trust in state regulation and banks following the Global Financial Crisis of 2008, advancements in digital technology, and the expansion of digital payment systems. The Covid-19 pandemic further accelerated their use due to the expected high returns on crypto asset holdings and increased online shopping and contactless payments.


Cryptocurrencies such as Bitcoin and Ethereum including DOT, ATOM, SAND, GALA, DOGE etc. operate on decentralized networks called blockchains, eliminating the need for intermediaries like banks and government authorities. Key features include decentralization, security through cryptography, varying degrees of privacy and anonymity, and limited supply to mitigate inflation and manipulation risks.



Unlike traditional fiat currencies issued by central banks, cryptocurrencies operate on decentralized networks called blockchains, which are distributed ledgers maintained by a network of computers or nodes. Key Features of Cryptocurrency, among others are: –


  • Decentralization: Cryptocurrencies operate on decentralized networks, eliminating the need for intermediaries like banks or government authorities to facilitate transactions;
  • Security: Cryptographic algorithms ensure the security and integrity of transactions, making them resistant to fraud and counterfeiting;
  • Anonymity: While transactions on the blockchain are transparent, cryptocurrency offers varying degrees of privacy and anonymity to users;
  • Limited Supply: Many cryptocurrencies have a predetermined maximum supply, reducing the risk of inflation and external manipulation.


In Pakistan, the legal landscape concerning cryptocurrency is still evolving. In April 2018, the State Bank of Pakistan (‘SBP’) issued a circular stating that cryptocurrencies were not considered legal tender and advised financial institutions against dealing in them or providing services to cryptocurrency-related businesses. 


However, in a subsequent statement presented in Court on October 20, 2021, by the State Bank of Pakistan (SBP) in the case of Waqar Zaka v Federation of Pakistan & Others (CP No. 7146 of 2019), it was clarified that the SBP does not possess the legal authority to ban the possession of cryptocurrencies. It is crucial to note that CP No. 7146 of 2019 (Waqar Zaka v Federation of Pakistan & Others) led to the High Court of Sindh at Karachi forming a “Committee on Cryptocurrency,” vide its order dated October 20, 2021, which submitted a confidential report on January 12, 2022. The Committee recommended a complete ban on cryptocurrency and related activities. Subsequently, on January 12, 2022, the High Court requested “joint recommendations” from the Ministry of Finance and the Ministry of Law. The joint recommendations, submitted on June 13, 2022, reiterated the Committee’s stance and recommended that the SBP issue circulars against cryptocurrency. Furthermore, it was recommended that the SBP and the Securities and Exchange Commission of Pakistan (SECP) jointly issue a public notice/advertisement explicitly stating that they have not granted any approval or license to individuals for processing, using, trading, holding, transferring value, promoting, or investing in cryptocurrencies/virtual currencies and assets. The Pakistan Telecommunication Authority (PTA) was also instructed to block access to all crypto-related websites and applications. However, on March 29, 2023, the High Court of Sindh dismissed the same Petition on the grounds of non-prosecution.


On the other hand, in November 2021, the Federal Minister for Finance and Revenue announced that Pakistan is actively developing its own central bank digital currency (CBDC). This significant initiative aims to leverage the benefits offered by blockchain technology while ensuring regulatory oversight and minimizing the risks associated with unregulated cryptocurrencies.


It is important to highlight that cryptocurrency exchanges serve as the primary platforms for buying, selling, and trading various cryptocurrencies. These exchanges operate worldwide, catering to a global user base seeking to participate in the cryptocurrency market. Some of the well-known cryptocurrency exchanges around the world include Binance, Coinbase, Kraken, Bitstamp, and Huobi. These exchanges offer a wide range of cryptocurrencies for trading, along with advanced trading features and secure storage solutions. In Pakistan, the cryptocurrency exchange landscape is still evolving, and the number of operational exchanges is relatively limited compared to other countries. Some of the exchanges operational in Pakistan include Binance.


As for the taxation of cryptocurrency in Pakistan, it remains a subject of ongoing debate and ambiguity. Currently, the Federal Board of Revenue (FBR) has not issued specific guidelines regarding the tax treatment of cryptocurrencies. However, it is important to note that individuals involved in cryptocurrency trading or investments may still be subject to general tax laws, including income tax and capital gains tax.


Cryptocurrency represents a transformative technology with the potential to reshape the global financial landscape. In Pakistan, the legal framework surrounding cryptocurrency is still in the developmental phase, with regulatory bodies taking cautious measures to address the associated risks. As the technology and market continue to mature, it becomes imperative for policymakers to strike a delicate balance between promoting innovation and safeguarding the interests of investors and consumers. Clarity and comprehensive regulations are crucial for ensuring the responsible use of cryptocurrency while effectively mitigating potential risks. It is important to closely monitor the evolving regulatory landscape in Pakistan as the country navigates through the opportunities and challenges presented by cryptocurrency. By staying informed about the latest rules and guidelines, individuals and businesses can effectively navigate the cryptocurrency ecosystem within the legal framework of the country.

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