Following the decision of Central Bank of India this week, Pakistan’s Central Bank has also cautioned people against the use of crypto currencies in any form. In its circular, BRDS’ Circular No. 3 Dated 2018, Banking Policy and Regulations Department (BPRD) has advised people not to involve in crypto trading since there is no exchange licensed and regulated by the central bank. State Bank of Pakistan Bans Cryptocurrencies Transactions.
It also warned exchanges and trading houses dealing in cryoto currencies, tokens and coins to not involve people in this business saying it is not a legal tender in Pakistan.
State Bank of Pakistan Bans Cryptocurrencies Transactions
SBP Warns Other Banks on Crypto Transactions
Firstly, State Bank advised General public not to be a part of crpto currencies such as Bitcoin, Ethereum, Ripple, Litecoin, Onecoin, Dascoin, Paydiamond and hundreds of other such virtual currencies.
Secondly, they warned Banks, Payment System Operators, Microfinance banks, Payment Service Providers, DFIs and all other financial institutions not to facilitate crypto traders in transaction or trading matters.
Why State Bank of Pakistan Bans Cryptocurrencies Transactions?
There seem to be no apparent reason other than the much circulated ambiguous and immutable nature of the currency. State Bank regulates all financial institutions including banks and exchanges for money transactions and remittances and there is no single crypto exchange that is licensed or regulated by this authority. State bank gives the following reasons for this warning:
- The price of crypto is highly volatile and witnesses huge swings resulting in massive loss to the traders. The bank says that the appreciation and depreciation of the value of any coin is only based on speculations and there is no intelligible methodology working behind this.
- The exchanges can shut down because of any reason since they are neither licensed nor regulated can cause huge loss to the investors. The law enforcement agencies can take action against these exchanges which will also result in loss of money of the investors.
- Since Wallets are insecure and the transactions are immutable, the hackers can get away with your money without leaving any trace. There have been few cases in which hackers have managed to get through the wallet addresses and rip off the traders of their money. (However, there are ways to protect your wallet keys which makes it impossible for the hackers to reach you)
- Because of the ambiguous nature of transactions, crypto money is highly vulnerable to be used in illegal activities like sex trafficking, money laundering and other criminal actions.
- There are people with malicious intent who invite people in invest in the Initial Coin Offerings (ICOs) and then runaway with their money. Facebook and Google have banned the advertisement of the crypto for the same reason.
Aftereffects of Ban on Cryptocurrencies by State Bank of Pakistan
We can easily perceive that by this move from the top financial institution of Pakistan can impact the trading volume negatively. Such news discourage investors as was observed in China which was mining 90% of the crypto currencies few months back but after the move of the regulatory bodies against crypto mining, the percentage dropped down to 7%. Let’s see what impact it puts on the crypto trading in Pakistan.
The Light at the End of the Tunnel
Crypto traders should also see the other side of the story by having a look at a crypto union which might be formed in coming months facilitating the traders all around the globe. There is always a possibility that Governments validate crypto trading since it is considered to be a future currency. Governments are adopting Blockchain which is the underpinning technology behind digital currencies. There could be anything in the offering in the months to follow. The volume of crypto trading has surpassed all the commodities and fiat currencies.