SHC panel to discuss cryptocurrency regulations

KARACHI: The Sindh High Court has constituted a committee under supervision of deputy governor State Bank of Pakistan along with officials of Ministries Of Finance, Information Technology, Pakistan Telecommunication Authority and Security and Exchange Commission of Pakistan to consider if any form of crypto currency is to be permissible under the Pakistani law.

The direction came on a petition against restrictions on trading virtual currencies in Pakistan. The SHC’s division bench, headed by Justice Mohammad Karim Khan Agha, observed that the SBP had conceded that crypto currency was not legal tender in Pakistan. The court, however, observed that if business was already being carried out underground, it would be better if it was regulated to avoid money laundering and terrorist financing or other illegal activities through such practice. The court observed that first issue which needs to be decided is whether Pakistan will or will not allow any trade transactions of any kind in crypto currency.

The court observed that a number of countries are allowing trade and since Pakistan is a progressive country and needs to keep up with global banking practices, it might want to consider the legality of crypto currencies provided that proper regulatory framework is put in place. The court observed that since the use of crypto currency is a relatively new form of banking/business transaction and much thought and consideration need to be taken if it is to be made permissible.

The court constituted a committee to be chaired by deputy governor of SBP, along with representatives of Ministry of Finance, Information Technology, SECP, PTA as well as petitioner Waqar Zaka, who is seeking to open crypto currency exchange business in Pakistan. The court observed that the committee shall consider his proposals and reply to him as whether or not it is advisable that Pakistan allows trade in crypto currency in any form whatsoever.

The court observed that the committee after fully considering all aspects of advisability is of the view that such trade could not be permissible, then it would send recommendations to the Ministry of Finance with its reasons. However, if otherwise, it shall forward its recommendations to the Ministry of Finance along with regulatory framework in draft form which might be considered appropriate subject to finetuning. The court made it clear that the decision whether or not to allow any form of crypto currency business, shall be a policy decision by the federal government.

It also directed that meetings of the committee, minutes of the meetings and all documents shall remain confidential and no member of the committee shall make any press release statement or social media activity or any other kind of disclosure. It directed the committee to submit the initial report regarding feasibility of introduction of crypto currency, by December 1.

The court in the meantime directed director Federal Investigation Agency to act strictly in accordance with the law against those persons seeking to indulge in the business of crypto currency and if deemed necessary seek guidance from the SBP on this issue. It is pertinent to mention that the SBP had earlier told the court that it had not declared crypto currency illegal and its use is difficult to regulate and that at this point in time no such regulations exists. Petitioner Waqar Zaka had filed the petition in the SHC challenging the SBP notification and sought legality of virtual currencies and crypto mining. The court was requested to declare impugned order of SBP as unlawful and direct the government to draft a regulatory framework regarding virtual currencies and assets and crypto mining.