January 12, 2022 — The State Bank of Pakistan (SBP), along with the federal government, have decided to ban cryptocurrencies in the country. The move comes on Wednesday as the central bank has submitted a report to the Sindh High Court (SHC) arguing to ban digital currencies.
Earlier, on January 7, the Federal Investigation Agency (FIA) issued notice to a representative of Binance Pakistan – a popular cryptocurrency exchange, asking their position on the company’s link with “fraudulent online investment mobile applications,” after a scam of 18 billion PKR was revealed to FIA through cryptocurrency applications. Later on Tuesday, the FIA confirmed that the company’s representative has assured the Authority complete cooperation in investigating the scam that led to the loss of Pakistanis’ money through 11 fraudulent apps that transferred money from the country to China. These apps later vanished from the app stores, and FIA says that the purpose of these apps was “to ask people for registration at Binance Crypto Exchange (Binance Holdings Limited) […] the next step was to transfer money from the Binance Wallet to the account of that particular application.”
Binance has set up a two-member committee to assist FIA in investigating the fraud, as reported by the Head of FIA Cyber Crime Zone Sindh, Imran Riaz, on Tuesday.
Break Through in fraudulent online applications linked with Binance case. Binance, contacted FIA Cyber Crime Sindh and assured its full support regarding mega financial scam investigation involving 11 fraudulent apps using Binance blockchain addresses.
— Imran Riaz (@ImmiRizz) January 11, 2022
In January 2019, the Pakistan Remittance Initiative (PRI) – a joint initiative of the State Bank of Pakistan, Ministry of Overseas Pakistanis and Ministry of Finance, announced that the country has adopted blockchain technology to attract overseas remittance. The news at the time published on PRI’s website states that the step is “in the direction defined by the Financial Action Task Force (FATF) to combat terror financing and money laundering.” The SBP spokesperson said at the time, “The central bank has allowed the use of the technology which has thousands of uses.”
The recent decision of the State Bank and the federal government to ban cryptocurrencies worries individuals who have already invested heavily in digital currencies, and are actively trading. As countries around the world move to legalise digital currencies, including in India where the Reserve Bank of India has appointed a department to regulate cryptocurrencies instead of blocking them, the decision can halt Pakistan’s technological advancement compared to the rest of the world. In addition, currently, Pakistan does not have a law that regulates digital currencies, hence the decision to ban them raises a question of the legality of the step.
Whereas, another important question that is raised here is whether digital trading can be successfully banned, owing to the nature of geography-based censorship and Pakistan’s history of failure to ban online platforms completely. Experts have argued repeatedly that online content cannot be banned, and ban on one platform or content not only leads to multiple ways to access the blocked content, but also encourages new, unknown, unsafe and unregulated platforms to offer the same content and services to the interested users. If approved by the Court, the ban on trading cryptocurrencies already raises questions that authorities will need to address.