Pakistan Introduces Crypto Currencies and Enhances Financial Transparency

Pakistani Prime Minister Imran Khan headed the high power conference on March 28, 2019 in PM office evolved a comprehensive strategy to fine-tune all aspects of the National Action Plan and improve financial transparency as demanded by the Financial Action Task Force (FATF). Khan said Pakistan had suffered immensely, both in terms of human lives and material losses, from the menace of terrorism. He also recounted the various legislative and administrative measures taken by the government in dealing with militancy and combating terror financing, money-laundering, abuses of hawala / hundi, and so on. PM stressed upon the need for sustained on the ground effort towards taking this struggle to a conclusive end..

PM Imran Khan considers the issue of money-laundering an existential threat to the state of Pakistan and a severe challenge to security and sovereignty. Consequently, the Federal Investigation Agency (FIA) has unearthed thousands of fake accounts, and the National Accountability Bureau has arrested influential politicians and bureaucrats. Six banks have been fined, while 109 bankers are being investigated for allegedly opening fake accounts.

Recently the Federal Board of Revenue and FIA have become quite assertive. Smuggled currency and jewelry amounting to more than 20 billion Pakistani rupees (US$141 million) were confiscated between July 2018 and January 31 this year, one report by a Pakistani financial monitory unit revealed.

Nevertheless, FATF officials are barely satisfied with Pakistan’s efforts to combat terrorism financing and money-laundering. Pakistan has been put on the FATF’s gray list, meaning its laws to combat these problems are “deficient.” Islamabad maintains that the FATF’s accusations are due to Indian lobbying and placement of certain Indian officials in various international financial institutions, including the FATF itself, who are behaving in an unprofessional manner and damaging Pakistan’s reputation. Pakistani Foreign Minister Shah Mehmood Qureshi has stated that the Indian government is vigorously lobbying against Pakistan to get it blacklisted by the FATF.

FATF officials have specifically identified crypto currencies as part of the terrorism-financing and money-laundering risk. Pakistani officials, being keen to comply with FATF recommendations, had little choice but to incorporate crypto regulations into their scope. Bringing crypto currencies into the same regulatory sphere as traditional electronic money-transfer methods will require the Pakistani government to accept the legitimacy of non-state-issued digital currencies, and this is a new and interesting development. Pakistan has decided in principle to introduce Bitcoin and related crypto currencies .

Several countries, including the US, Japan, South Korea and many European nations, have already rendered legitimacy to crypto currencies while also controlling and monitoring virtual transactions. Many people here in Pakistan are excited that the change of policy will bring about a revolution in money transfer and even in investments. However, some people have not even heard of crypto currencies, while others are debating the legitimacy of crypto currencies according to Islam.

The standard arguments against crypto currencies include that they are ambiguous and speculative; they are issued by various interest groups and not by any state; transactions are difficult to trace and hence facilitate various criminal activities; and they are not backed by physical assets like gold.

Some of these concerns have merit, as recent currency manipulations in Pakistan have shown. Therefore, if crypto currencies are the future of money, governments should be willing to regulate them rather than exhibiting timid denials.

The State Bank of Pakistan has decided to introduce regulations on electronic money institutions to overcome most of the challenges and apprehensions relating to crypto currencies. “These new regulations will help combat money-laundering and terrorism financing, while [they] will also help regulation of digital currency throughout the country,” a senior official said.

Pakistan has vast natural resources and hard-working people, so its poverty is unnatural. The primary reason behind Pakistan’s financial difficulties has been a problematic neighbor – India, which continuously forces Pakistan to spend massive funds on defense – and a corrupt political-bureaucratic nexus involved in massive money-laundering encouraged and aided by foreign manipulators. Strict financial monitoring system and resultant transparency are in the best interests of Pakistan, and hence we should support the government’s plan to implement it.