Crypto Ban in Pakistan is Ineffective After Traders Discovered Other Ways to Trade
Crypto ban in Pakistan
Pakistan recently banned cryptocurrency, but the ban has not been as effective as the country’s central expected. The central bank stopped commercial banks and other financial institutions from dealing with cryptocurrency thus making it hard for exchange companies in the country. Locals, however, have come up with other ways to buy and sell the digital currencies defying the ban and other warnings.
These latest developments in Pakistan have shown a good example of the ineffectiveness of financial institutions in trying to fill a legal vacuum and coming up with prohibitive measures. Central banks seem to forget that they are not governments nor parliaments and that their regulatory measures may not be very effective.
The State Bank of Pakistan issued a circular in April stopping the dealing of digital currencies immediately after a similar measure was issued by the Reserve Bank of India. The Indian bank gave traders and banks three months to comply, unlike its competitor from Pakistan who imposed the ban with immediate effect.
During the ban, the State Bank of Pakistan said that digital currencies and ICOs were not legal adding that it had not authorized any entity to buy or sell any coins in Pakistan. It went on to advise all banks, payment system operators and even microfinance institutions to refrain from dealing with digital currencies.
The decision affected many exchanges with the first exchange in the country Urdubit deciding to close completely. According to Urdubit CEO Danyal Manzar: “The decision was made in a hurry, and it should have provided ample time for proper shutdown. However, we have decided to respect the decision by SBP.” During the closure, Urdubit told its clients to withdraw their crypto funds from the exchange, but up to date many users still have Bitcoin in their accounts on that exchange.
Manzar believes that people who want to trade can continue because there are many alternative ways to do so. He did not see any huge risk in trading cryptocurrencies noting that the only area that would be affected is the stock market and not the whole monetary system. This is because 80% of stock exchange traders went try their luck in digital currencies.
Crypto trading in Pakistan is still going on
Several crypto traders said that crypto trading volumes have gone up after the ban because the traders discovered alternative trading methods. Majid Ali, a crypto trader in Lahore, noted that:
“Crypto traders have noted that the Central bank has not and cannot ban crypto trading in Pakistan. This is because the bank has only stopped other banks from dealing with crypto meaning that if you trade without dealing with banks, you can still own and trade cryptocurrencies in the country which is under the IT ministry.”
During the last week of April, the price had moved to 1.4 million dollars almost reaching the December all-time highs. The prices of Pakistan’s only digital coin Pakcoin has also gone up by 60% since the ban. Pakcoin’s founder Abu Shaheer said that the ban actually favored the industry in the country.
Several sources form the Ministry of Information Technology and Telecommunication in Pakistan told the Asia Times that the government in Islamabad was not planning to formally declare digital currencies illegal in the country. According to one government official: “We have made our recommendations about the ban of digital currencies, and proper legislation is being worked on.”
Majid, however, noted that as much as the legislation was likely to hit the crypto trading, there are alternatives to dealing with the digital currencies. He added that it would be hard for the Pakistan government to stop an international commodity being traded in other countries. He concluded by stating that the ban would be dangerous because it would actually open transfer channels which can be used for illegal activities.