Pakistan’s central bank has told banks and other financial services providers not to support virtual currency transactions. The State Bank of Pakistan (SBP) advised the general public in a statement on its website and in a tweet that it regulates both domestic and international payment and money transfer services.
Pakistan’s announcement on Friday follows one by India’s central bank from having any links to virtual currency dealers, which immediately slashed cryptocurrency prices on local exchanges.
Transfers Could Bring Prosecution
SBP said anyone using virtual currencies to transfer funds outside Pakistan could be prosecuted, according to propakistani.pk. Any person found using virtual currencies, coins or tokens for the purpose of transferring money outside Pakistan will be subject to prosecution as per applicable laws.
The SBP also asked commercial and microfinance banks, as well as payment system operators and payment service providers not to facilitate account holders seeking to carry out transactions in the form ICO tokens and cryptocurrencies,
SBP noted that it has not recognized cryptocurrencies as legal tender and has not authorized or licensed any entity for the issuance, sale, purchase, exchange or investment in any currencies or tokens.
Central Bank Cites Risk
The SBP took the action on account of the following risks:
• Virtual currencies are highly volatile, unstable and the prices are primarily based on speculations;
• The failure and closure of virtual currency exchanges and businesses for any reason, such as action by law enforcement agencies; and
• The number of security compromises of virtual currency exchanges and wallets worldwide in which large amount of funds have been lost.
In addition, fraudsters have also begun offering pyramid style investment schemes, promising high returns to the general public in Pakistan. SBP warns that such schemes, which are similar to Ponzi schemes, this can cause significant losses to the general public.
Reserve Bank Of India Clarifies Position
Late on Friday, the Reserve Bank of India issued a more detailed circular stating any regulated entities that already provide virtual currency services are required to cut all ties within three months.
Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges that deal with them and transfer funds in accounts relating to purchase or sale of virtual currencies.
The RBI acknowledged that blockchain technology has many potentially-beneficial applications but argues that cryptocurrencies raise a number of concerns related to consumer protection, market integrity, and preventing financial crimes.
India-based cryptocurrency trading volume had already plummeted by 90 percent in recent months as banks themselves had already begun to restrict the ability of cryptocurrency exchanges to secure access to financial services and locals to trade with funds stored in Indian bank accounts. However, until now, this blockade had not been codified into official government policy.
Featured image from Shutterstock.