Why Is Cryptocurrency Ban in Pakistan
What is Cryptocurrency
Cryptocurrency is a digital or virtual currency that uses cryptography for security. It is decentralized, meaning any government or institution does not control it. Instead, transactions are recorded on a public digital ledger called a blockchain. Bitcoin, the first and most widely-used cryptocurrency, was created in 2009. Since then, thousands of other cryptocurrencies have been developed, including Ethereum, Litecoin, and Ripple. Cryptocurrencies can be used to purchase goods and services or traded on online exchanges for fiat currency or other cryptocurrencies.
What are the Advantages of Cryptocurrency
Decentralization: Cryptocurrency is decentralized, meaning any government or institution does not control it. This allows for more freedom and autonomy in financial transactions.
Anonymity: Transactions made using cryptocurrency are typically anonymous, as they are recorded on a public digital ledger called a blockchain, but the identity of the parties involved is not revealed.
Security: Cryptocurrency transactions are secured using cryptography, making them difficult to hack or tamper with.
Transparency: The blockchain technology used in cryptocurrency provides a high level of transparency, as all transactions are recorded and can be publicly viewed.
Borderless transactions: Cryptocurrency allows for borderless transactions, as it is not tied to any specific country or jurisdiction.
Faster and cheaper transactions: Transactions made using cryptocurrency can be faster and cheaper than traditional bank transfers, as they do not require intermediaries such as banks.
No chargebacks: Once a transaction is made with cryptocurrency, it is final and cannot be reversed, unlike credit card chargebacks.
What are the Disadvantages of Cryptocurrency
Volatility: Cryptocurrency prices can be highly volatile and can fluctuate rapidly, making them a risky investment.
Lack of regulation: Cryptocurrency is not regulated by governments or financial institutions, which can make it susceptible to fraud and other illegal activities.
Limited acceptance: Cryptocurrency is not widely accepted as a form of payment, and it can be difficult to find merchants that accept it.
Security risks: Cryptocurrency exchanges and wallets can be hacked, and if proper security precautions are not taken, users risk losing their funds.
Complexity: The technology behind cryptocurrency can be complex and difficult for the average person to understand.
Taxation: Taxation on cryptocurrency varies by country, and it can be difficult to determine the tax liability on cryptocurrency transactions.
Environmental impact: The energy consumption associated with certain cryptocurrency mining activities can be high, and this has led to criticism over the environmental impact.
Why Cryptocurrency is Ban in Pakistan
Cryptocurrency is banned in Pakistan due to concerns over its potential use for illegal activities such as money laundering and terrorist financing. The State Bank of Pakistan issued a statement in April 2018 warning citizens about the risks associated with virtual currencies and announcing a ban on their use. The central bank also prohibited financial institutions from dealing in cryptocurrencies.
Status of Cryptocurrency in Pakistan
In Pakistan, cryptocurrency is currently banned by the State Bank of Pakistan (SBP). The SBP issued a statement in April 2018 warning citizens about the risks associated with virtual currencies and announcing a ban on their use. The central bank also prohibited financial institutions from dealing in cryptocurrencies. The SBP cited concerns over the potential use of cryptocurrency for illegal activities such as money laundering and terrorist financing as the reason for the ban. However, despite the ban, it is reported that the use of cryptocurrency still persists in Pakistan through peer-to-peer trading and over-the-counter transactions.
How can government regulate cryptocurrency?
There are several ways that governments can regulate cryptocurrency:
Licensing and registration: Governments can require cryptocurrency exchanges and other businesses dealing with cryptocurrency to be licensed and registered. This allows for greater oversight and can help to prevent illegal activities such as money laundering and fraud.
KYC and AML regulations: Governments can implement know-your-customer (KYC) and anti-money laundering (AML) regulations for cryptocurrency businesses, which would require them to collect and verify the personal information of their customers and report suspicious activities to the authorities.
Taxation: Governments can impose taxes on cryptocurrency transactions, similar to how they tax other financial transactions.
Education and awareness: Governments can invest in educating the public about the risks and benefits of cryptocurrency to help them make informed decisions.
Cybersecurity regulations: Governments can implement regulations to protect consumers from cyber-attacks and ensure that exchanges and other businesses have adequate security measures in place.
International cooperation: Governments can work with other countries to establish global regulatory standards for cryptocurrency, as it is a global phenomenon and a coordinated approach could be effective.
It’s worth noting that due to the decentralized nature of the technology, it is difficult for one country to fully regulate it.
Admin at The Pakistan Gazette