SBP looking to launch its own digital currency for trading in digital assets
The State Bank of Pakistan (SBP) has clarified that restrictions under the Foreign Exchange Regulation Act (FERA), including the $100,000 annual limit on outbound transfers, will apply to foreign transactions involving digital currencies. The announcement highlights the challenges Pakistan faces in introducing a formal digital currency framework.
The SBP is also working on
launching its own digital currency, which would be used for trading in digital
assets. However, this can only proceed once the Pakistan Virtual Assets
Regulatory Authority (PVARA) Bill is passed, the SBP Act is amended, and a regulatory
framework is established.
Speaking before the Senate Standing Committee on Finance,
SBP Acting Deputy Governor Dr. Inayat Hussain said FERA would
govern digital assets, including the maximum outbound transfer of $100,000 per
individual annually.
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The committee, chaired by PPP Senator Saleem Mandviwalla, began clause-by-clause discussions on the PVARA Bill. The government had previously issued a PVARA Ordinance and is now seeking parliamentary approval to provide the authority with permanent legal backing.
Legal experts acknowledged challenges in
applying FERA to digital assets. Shehroz Bakhtiyar, legal consultant
to the Law Division, said amendments would be necessary, as the current law
cannot fully address digital asset transactions. Legislators supported this
view, with PML-N
Senator Afnanullah Khan noting that Pakistanis have
invested over $21 billion in digital assets and emphasizing the
urgent need for regulatory clarity.
Under the proposed framework:
·
Licensees would be required
to enforce the $100,000 limit, though practical enforcement may be
difficult.
·
PVARA would provide the
broader legal and regulatory framework, finalized after further consultations.
·
Existing laws, including FERA, FATF
recommendations, and the Anti-Money Laundering Act, would apply
to digital assets.
·
Foreign digital currency firms,
like Binance, would need local offices, with FERA applicable
to their operations.
Dr. Hussain said the SBP-issued digital
currency would be pegged to the rupee and could be held alongside traditional
rupee balances in a single bank account. Once issued, commercial banks would be
consulted on digital asset demand, allowing customers to transact in either
rupees or digital rupees.
The committee set an upper age limit of 55 for
the PVARA chairperson, requiring at least five years of experience in digital
finance or technology, and included parliamentary representation on the
authority.
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looks to regulate digital assets, including cryptocurrencies
Until the legal framework is in place, restrictions on banks and dealers handling digital currencies will remain. The SBP’s 2018 circular had previously declared cryptocurrencies illegal and mandated reporting of such transactions to the Financial Monitoring Unit. The circular stated that digital currencies like Bitcoin, Litecoin, Pakcoin, OneCoin, DasCoin, Pay Diamond, or ICO tokens are not legal tender and are neither issued nor guaranteed by the government.
The committee also recommended placing PVARA
under the Finance Ministry instead of the Cabinet Division for better
operational effectiveness. Under the proposed law, digital service providers
may offer nine services, including advisory, broker-dealer, custody, exchange,
lending/borrowing, derivatives, asset management, transfer and settlement, and
fiat-referenced token issuance.
Source: Express Tribune