Central bank warns over cryptocurrencies

KARACHI: The State Bank of Pakistan (SBP) on Friday warned financial institutions and general public not to trade in bitcoin or other cryptocurrencies as the country does not recognise virtual currency as legal tender.

“Virtual currencies/coins/tokens like Bitcoin, Litecoin, Pakcoin, OneCoin, DasCoin, Pay Diamond etc are neither recognised as a legal tender nor has SBP authorised or licensed any individual or entity for the issuance, sale, purchase, exchange or investment in any such currencies… in Pakistan,” the central bank said in a statement.

“Further, banks/ DFIs/ microfinance banks and payment system operators/ payment service providers have been advised not to facilitate their customers/account holders to transact in virtual currencies/ initial coin offerings, tokens vide BPRD’s Circular No. 03 of 2018.”

The apex bank said virtual currencies provide high degree of anonymity and potentially could be used for facilitating illegal activities.

It added that also due to the ambiguous nature of virtual currencies, no legal protection or recourse is available to any individual in the event of a loss incurred due to any or all the following risks.

The state bank said one of the risks was high price volatility as investments tied to virtual currencies were highly unstable and were primarily based on speculations.

“Another risk was failure/closure of virtual currency exchanges/businesses due to any reason including action by law enforcement agencies,” the SBP said.

The central bank said hacking/security compromises of crypto currency exchanges and wallet businesses was yet another risk as a number of instances have been recorded around the world where huge amount of funds have been lost due to the the same.

Further, it said, fraudsters were also offering pyramid style investment schemes and coins and promising high returns (similar to Ponzi schemes) to the people at large in Pakistan.

“This can cause significant loss to the general public,” the SBP said.

The central bank said domestic and international payment and money transfer services in Pakistan are regulated by the SBP under the applicable laws.

“In this regard, no entity is currently licensed or authorised by SBP to offer money remittance services and products in Pakistan using virtual currencies/ coins/tokens,” it said.

The bank added that persons using such currencies for the purpose of transferring value outside Pakistan are subject to prosecution as per the applicable laws.

“In view of the above, the general public in their own interest is advised to be cautious of and refrain from indulging in activities relating to mining, trading, exchanging, transferring value, promoting and investing of virtual currencies to avoid any potential financial loss and legal implications,” the SBP said.