Pakistan's central bank warns against trading in digital currencies

The State Bank of Pakistan (SBP) has issued an important advisory warning regarding virtual currencies, which are not recognized as legal tender in the country.

The SBP stated that it has not authorized or licensed any individual or entity to issue, sell, purchase, exchange, or invest in any virtual currencies, coins, or tokens in the country.

Earlier this year, during a meeting between the Federal Investigation Authority's director general and the SBP governor, concerns were raised about cryptocurrency transactions and illegal money transfers.

The discussion also covered strategies for preventing financial crimes, highlighting the need for SBP's collaboration.

Banks, finance institutions and payment system operators are already advised not to facilitate transactions involving virtual currencies or initial coin offerings (ICOs).

Virtual currencies, due to their high level of anonymity, can be used for illegal activities.

The SBP stressed that the ambiguous nature of virtual currencies means there is no legal protection for individuals who suffer losses from high price volatility, the failure of exchanges, or hacking incidents.

Fraudsters have been known to offer pyramid-style investment schemes, promising high returns similar to Ponzi schemes, which pose significant risks to the public.

SBP warned that individuals using these for value transfer outside Pakistan may face prosecution under applicable laws.

Despite the warnings, Bitcoin adoption has increased in Pakistan, with people using peer-to-peer services like Binance and Paxful to acquire Bitcoin, making Pakistan one of the top countries in Bitcoin adoption rates among emerging markets in the developing world.