Pakistan warns against dealing in cryptocurrencies, declares them illegal

In this file photo, Bitcoins created by enthusiast Mike Caldwell are seen at his office in Sandy, Utah, Sept. 17, 2013. (REUTERS)

• Users of virtual currencies, coins or tokens for transferring value outside Pakistan are subject to prosecution
• No entity is currently licensed or authorized by the State Bank of Pakistan (SBP) to offer money remittance services and products in Pakistan using virtual currencies, coins or tokens, said an SBP statement

KARACHI: Pakistan’s central bank on Friday warned against dealing in virtual currencies, coins or tokens such as Bitcoin, Litecoin, Pakcoin, OneCoin, DasCoin, and Pay Diamond.
It said such currencies are not recognized as a legal tender, and no individual or entity has been authorized or licensed for the issuance, sale, purchase, exchange or investment in any such crytocurrencies in Pakistan.
The State Bank of Pakistan (SBP) advised banks, development finance institutions, microfinance banks, and payment system operators or payment service providers not to facilitate their customers or account holders to transact in virtual currencies, Initial Coin Offerings (ICOs) or tokens.
Virtual currencies, coins or tokens provide a high degree of anonymity and can be used for facilitating illegal activities. Also, because of the ambiguous nature of virtual currencies, no legal protection or recourse is available to any individual in the event of a loss incurred owing to any of the following risks:
1) High-price volatility as investments tied to virtual currencies are highly unstable and based primarily on speculations.
2) Failure, closure of virtual currency exchanges or businesses for any reason, including action by law enforcement agencies; and
3) Hacking or security compromises of cryptocurrency exchanges and wallet businesses as a number of instances have been recorded around the world where a huge amount of funds has been lost because the exchange or wallet operations have been hacked or compromised.
Further, Fraudsters are also offering pyramid-style investment schemes and coins and promising high returns, similar to Ponzi schemes, to the public in Pakistan. This can cause significant loss to the public, the central bank cautioned.
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 authorized by SBP to offer money remittance services and products in Pakistan using virtual currencies, coins or tokens. Persons or entities found indulging in such practice are liable to legal action, said an SBP statement.