There is only one word to describe the current state of Pakistan’s crypto market: chaotic.
The Central Bank has clearly defined cryptocurrency in Pakistan as illegal and gave no leeway for trading or investing in them.
A few businesses have already started accepting cryptocurrency payments after supplementing their income with digital assets. Still, most remain hesitant due to fear of legal retribution, which they could face if caught by the authorities.
However, some traders manage to continue their operations despite all odds through connections with foreign exchanges and coin holders living outside the country.
Here we shall discuss all aspects of digital currencies and how they can influence local trade and investment portfolios. Be warned, though – things can change at a moment’s notice, so make your moves wisely.
How does the government view cryptocurrencies?
The State Bank of Pakistan has spelt out its stance on cryptocurrencies, stating that any businesses or individuals engaged in activities surrounding digital assets could face legal action.
However, there is no specific legislation that criminalizes their use, rendering them legal to hold and trade for now. The SBP has also asked domestic banks to avoid dealing with any parties associated with crypto transactions. Investors who let the money remain in exchanges rather than withdrawing it to personal bank accounts may be less likely to attract attention from the authorities if caught.
In other countries, there have been instances where defaulting on taxes due after trading digital currencies resulted in jail time for some individuals, so it is crucial to be aware of the risks involved with trading assets that are not officially recognized.
Securities and Exchange Commission
Pakistan’s Securities and Exchange Commission has also considered cryptocurrencies as securities traded on exchanges. A few cryptocurrency-based businesses have already applied for licenses with the SECP to legitimize their operations in the country.
Due to growing demand, some major companies dealing in traditional means of exchange have started accepting cryptocurrencies as payment options. Still, there is no official legislation governing transactions involving crypto assets.
Some top Pakistani institutions like the National University of Science and Technology (NUST) and Bahria University are exploring ways to utilize blockchain technology for academic purposes. Authorities are wary of allowing an unregulated market to grow into a parallel economy that could have severe repercussions for the country’s economic stability.
Many die-hard crypto enthusiasts believe that cryptocurrencies will eventually replace fiat currency in Pakistan. Still, it is unlikely to happen anytime soon due to inadequate infrastructure and widespread illiteracy among the population.
Internet penetration rate
Pakistan has an internet penetration rate of 42%, which means only half of the total population has access to online services like cryptocurrency exchanges or online wallets where coins can be stored. Large sections of the society also lack essential banking services, complicating matters further.
It will take at least a decade before blockchain technology can establish itself as a mainstream concept in this highly centralized economy still heavily reliant on government fiscal policy.
It should become clear from the above that cryptocurrencies are not illegal in Pakistan. There is no official legislation yet, but there is a strong belief in the local government that it should not become an alternative parallel system of exchange.
Even if individuals can use digital currencies like Bitcoin to make payments for goods and services online, they are not legal tender since the country has its currency for that purpose.
How do I buy or receive cryptocurrency?
There are several ways to obtain cryptocurrency in Pakistan. LocalBitcoins, Paxful and CoinSwitch are peer-to-peer exchanges where prospective buyers can find sellers via bank transfers or depositing cash at participating exchange outlets.
These services limit transactions until you have completed enough trades to build credibility with the platform’s administrator. You will also need some form of identification to verify your account.
All transactions are made in cryptocurrency units between individual buyers and sellers without the involvement of any third parties. The exchanges act as market makers who match incoming buy requests with existing sell offers based on price conditions set by both parties. They charge transaction fees for all trades conducted on their platforms which vary from one exchange to another.