To Combat Terrorism Financing, Pakistan Regulates Cryptocurrency

Kathleen Jordan
By Kathleen Jordan
Posted on April 2, 2019
To Combat Terrorism Financing, Pakistan Regulates Cryptocurrency

Pakistan is introducing cryptocurrency regulations to combat the financing of terrorism. The country will follow the recommendations of the Financial Action Task Force (FATF). The central bank has earlier issued cautionary advice to other financial services organizations for offering services relative to virtual currency transactions.

The SBP will introduce the Electronic Money Institutions regulations to oversee cryptocurrencies. According to sources close to discussions:

“These regulations will help to combat money laundering and terrorism financing while it will also help regulation of digital currency throughout the country.”

In April last year, the State Bank of Pakistan (SBP) presented its stand against the cryptocurrencies with a “Caution Regarding Risks of Virtual Currencies” tweet.

General Public is advised that domestic and international payment and money transfer services in Pakistan are regulated by SBP under the applicable laws.

But with the FATF recommending regulation and oversight of digital assets to counter terrorism financing, tax evasion, and money laundering, Pakistan was left with little choice but to accept the use of cryptocurrencies within its borders so it could monitor the flow of digital funds.

Pakistan has been given the nod of approval by FATF for its efforts to combat terrorism financing and money laundering. Previously, Pakistan was on the FATF’s grey list, meaning its laws to combat terrorism financing and money laundering were “deficient”.

The FATF’s report into cryptocurrencies warned that the:

“… characteristics of virtual currencies, coupled with their global reach, present potential AML/CFT risks, such as the anonymity provided by the trade in virtual currencies on the internet, the limited identification and verification of participants, the lack of clarity regarding the responsibility for AML/CFT compliance, supervision and enforcement for these transactions that are segmented across several countries, [and] the lack of a central oversight body.”

Bringing cryptocurrencies into the same regulatory sphere as traditional electronic money transfer methods require the Pakistani government to accept the legitimacy of non-state issued digital currencies.

The Federal Minister for Finance, Asad Umar, the Governor of the State Bank of Pakistan, Tariq Bajwa along with the Finance secretary Yonus Dhaga will be present at the time of the launch of new crypto regulations at SBP office, Islamabad.

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