The ban on cryptocurrency-related activities in Pakistan has been reportedly rendered ineffective by traders who have found alternate ways to buy or sell virtual currencies.
Although the State Bank of Pakistan (SBP) has banned commercial banks, financial firms and traders from operating in cryptocurrencies, some are finding ways and means of circumventing this ban. According press reports, individual traders are finding alternative methods to buy and sell cryptocurrencies, thus defying warnings and other prohibitions.
This example with Pakistan shows that it is very difficult for state authorities to ban cryptocurrencies with prohibitive legal measures. Central banks have collective amnesia when they forget that they are not parliaments or governments and their regulatory responsibilities cannot supersede normal legal practices. The recent arbitrary decision by the Pakistan State Bank when it decided to ban crypto-related activities is simply another case in point.
A Lahore-based trader told Asia Times that the SBP may have banned banks from entertaining cryptocurrencies, but traders “can own and trade virtual currency in Pakistan, which comes under the IT ministry” as long as they’re not dealing via banks.
In April, the SBP issued a circular which dealt with the prohibition of dealing in virtual currencies. This followed on from a decision made by the Reserve Bank of India, which is seen as SBP’s rival in the region. However, while the Indian bank gave institutions and operators three months to comply, the Pakistani bank decided to issue an immediate ban. The SBP ruled that virtual currencies as well as tokens were not legal tender and also issued a stark warning that it had not authorized any individual or entity to engage in the trading of cryptocurrencies in Pakistan. Additionally, all banks and financial institutions were virtually prohibited from dealing in cryptocurrencies.
It has to be said that the Pakistani market is nowhere near comparable to India’s booming crypto market. Urdubit, Pakistan’s first cryptocurrency exchange, told The Express Tribune there are only about 100 coins traded across all mediums before the ban came into effect. Urdubit closed down permanently after the ban, with its CEO Danyal Manzar stating that the decision was hasty and that ample time should have been provided for a properly organized shutdown.
Urdubit had warned its clients to withdraw all their fiat and crypto funds before the ban came into effect; however, a month later there were users who still had some BTC in their accounts. Manzar said that those who want to continue trading will do so as there are “alternative ways still exist that will continue to be tapped no matter how risky they are.”
“About 80 to 85% of the traders from stock exchanges came to try their luck in virtual currency,” he added.
Interestingly, although trading levels and volumes went down after the ban, these eventually picked up with Pakistan’s state-backed currency Pakcoin jumping by 60% in price. Pakcoin founder Abu Shaheer said that the central bank’s measure worked in favour of the coin with a lot of interest generated.
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