Pakistani court orders government to regulate cryptocurrency within two months

A Pakistani court has directed the federal government to introduce a regulatory framework for cryptocurrency within two months, amid mounting concerns over illegal digital asset trading and its potential misuse.

The order was issued by a two-judge panel of the Peshawar High Court, comprising Justice Arshad Ali and Justice Khurshid Iqbal. In a written ruling, the bench called on authorities to draft comprehensive legislation to oversee the use and trade of cryptocurrencies in the country.

A government representative told the court that the federal government had initiated the process of regulating digital currencies and requested additional time to complete the framework. The court accepted the request, allowing authorities up to two months to finalize and submit a report.

The case was brought by Barrister Huzaifa Ahmed, who challenged the legality of cryptocurrency and foreign exchange (forex) trading in Pakistan, citing the absence of regulatory oversight.

“In the modern digital age, virtual currencies have gained popularity, facilitating the electronic transfer of money, but no legal or regulatory mechanism currently exists in the country to control such transactions,” he argued.

Ahmed urged the court to declare cryptocurrency and forex trading illegal, highlighting that despite a 2018 notification by the State Bank of Pakistan (SBP) deeming such activities unlawful, a significant number of individuals continue to engage in them through online platforms.

“Coaching centers and academies promoting cryptocurrency and forex trading are operating openly in Khyber Pakhtunkhwa, and these activities are being widely advertised on social media,” he said.

The petitioner also expressed concerns over the potential use of digital assets for money laundering and terror financing, warning that unregulated trading could pose a serious threat to national security. “It is the government’s responsibility to impose a ban on these illegal businesses and take strict action against those involved,” he asserted.

In its response, the Federal Investigation Agency (FIA) stated that while it primarily handles cases under the Foreign Exchange Regulation Act (FERA) 1947, cryptocurrency falls within the broader scope of “foreign exchange.”

The FIA added that although digital currencies remain unregulated in Pakistan, online fraud related to such transactions is prosecutable under the Prevention of Electronic Crimes Act (PECA).

Shahzad Gul, a section officer of the State Bank of Pakistan’s Banking Services Corporation, informed the court that the SBP has not authorized any individual or entity for the issuance, sale, purchase, exchange, or investment in virtual currencies, coins, or tokens. He noted, however, that the decision to legalize or ban cryptocurrency rests with the federal government.

After hearing arguments from all sides, the court instructed the government to finalize the regulatory process within two months and present a detailed report on the matter.