Twitter has recently been in a frenzy over tweets about the legality of cryptocurrencies in Pakistan by incendiary crypto enthusiast Waqar Zaka. The influencer (uninformed) Tweets prompted prominent members of the entertainment industry to demand an explanation of what exactly was going on.
Their request came after Waqar Zaka spoke about getting a judicial clarification on his Twitter account which said cryptocurrencies are not banned in Pakistan. He further lamented that the State Bank of Pakistan has banned the public from trading digital currencies. He wrote: “After fighting for 2 years, I got a clarification from the court that Crypto is not banned. Now the problem is, the State Bank doesn’t allow us to buy crypto. Today, India’s central bank allowed customers to buy crypto after a Supreme Court order #PakistanNeedsCrypto. “
After fighting for 2 years I got a clarification from the court that Crypto is not banned, now the problem is that the State Bank does not allow us to buy crypto. Today, India’s central bank allowed clients to buy crypto after Supreme Court order #PakistanCrypto Needs pic.twitter.com/yNl7qa29um
– Waqar Zaka (@ZakaWaqar) May 31, 2021
Afterwards, singer Ali Zafar and producer Humayun Saeed retweeted the post for more cryptocurrency information and clarification on what exactly Zaka was rambling on.
If you are just as confused, rest assured, there is a somewhat complicated (but not impossible to grasp) explanation. While Wakar Zaka is correct that cryptocurrencies are not banned, when it comes to buying crypto, the situation is far from straightforward.
A cryptocurrency is a kind of payment mechanism that does not require a central authority, and its state is maintained by distributed consensus. In addition, it is an intangible asset and does not exist in physical form. Because there is no institution backing cryptocurrencies, they are subject to massive price volatilities.
The latest circular issued by the State Bank of Pakistan on cryptocurrencies dated April 6, 2018 states that virtual currencies (VCs) or initial coin offering tokens (ICOs) are not legal tender, issued or guaranteed by the government of Pakistan. This circular makes it clear that cryptocurrencies are not prohibited, but it excludes them from legal tender, meaning that virtual currencies cannot be used for payment anywhere in the country.
Developing further, he states that “SBP has not authorized or authorized any person or entity to issue, sell, buy, trade or invest in such virtual currencies / coins / tokens in Pakistan”. This means that if a person is the victim of a cryptocurrency scam, they cannot go to court or any financial regulator in Pakistan to file a complaint, as virtual currencies are not considered valid. legal in Pakistan.
This circular poses a risk to cryptocurrency traders in Pakistan as they will not be able to express their concern to any government authority.
In the statement, the central bank ordered banks and other financial institutions to refrain from dealing, promoting and investing in virtual currencies / tokens and prevented them from making it easier for customers to complete such transactions.
This circular was issued following Pakistan’s gray-listing by the Financial Action Task Force (FATF) in 2018. Cryptocurrencies can be used to launder money, which can damage the progress of the country. Pakistan on FATF guidelines. The central bank therefore issued these directives to enter the white list. Given Pakistan’s current position in the FATF gray list, the State Bank of Pakistan has little or no incentive to reverse this order, so cryptocurrencies will continue to be excluded from the market. legal tender in Pakistan.
Additionally, the country could take signals of China’s crackdown on cryptocurrency trading and mining due to concerns about potential fraud, money laundering, and business losses by individual investors.
In addition, Turkish cryptocurrency trading companies Thodex and Vebitcoin abruptly halted operations in April-May 2021 and scammed clients of millions of lire after which the Turkish government launched a crackdown on cryptocurrency companies. . Such incidents are also to be feared in Pakistan, where the country has taken a cautious stance.
Finally, Waqar Zaka talks about the Indian central bank allowing customers to buy cryptocurrency after the Supreme Court order. However, the influencer did not reveal the cryptocurrency history in India that led to this decision.
In February 2020, the Reserve Bank of India reported major concerns over cryptocurrencies and launched a crackdown on crypto trading platforms.
As an alternative, the Indian government has proposed a cryptocurrency bill aimed at banning all cryptocurrencies in the country except for a state-backed digital currency. However, the Supreme Court of India reduced the ban on the grounds that it was unconstitutional and issued the order in question. On the other hand, the Governor of the State Bank of Pakistan, Dr Reza Baqir, said in April 2021 that Pakistan was considering introducing its own digital currency.
So, it is safe to say that virtual currencies have never been banned in Pakistan, you just cannot exchange them in the country. However, since the State Bank of Pakistan will regulate the digital currency it creates, it will eventually become legal tender in Pakistan as well.
Zaka throwing out such vague and unfounded claims on the Internet, written in such a way that they annoy people, is socially irresponsible. For better or worse, celebrities like Zaka have a wider reach than subject matter experts, with celebrities having the power to spread (dis) information faster than anyone else. Zaka’s claims lacked the nuance needed to understand the situation surrounding crypto, which can just as easily descend into utter chaos. And while the nuance isn’t exactly what we expect from most influencers / celebrities, it would be a welcome change to see Zaka even trying to release specific information devoid of convoluted claims seemingly backed up by official screenshots. out of context.