Islamabad:
The Central Bank said on Wednesday that restrictions under the Law of Currency Regulation (FERA), including the maximum annual limit of $ 100,000, will be applied to foreign digital currency transfers. The statement underlines the challenges to introduce a new digital currency regime in Pakistan.
The State Bank of Pakistan (SBP) also said it is working on the launch of a new digital currency. It would be used to trade in digital assets. But this can happen only after the bill of the regulatory authority of Virtual Assets of Pakistan (Pvara) is approved, the law of the State Bank of Pakistan is modified and a regulatory framework is established.
Appearing before the Permanent Committee of Finance of the Senate, the interim vice governor of the SBP, Dr. Inayat Hussain, said that FERA would be applicable to digital assets. He said that the limits of the law will be applied, including the maximum output transfer of $ 100,000 by an individual in one year.
The committee, headed by Senator PPP Salem Mandviwalo, began the clause discussions by clause on the proposed Pvara bill. The Government has already issued a Pvara ordinance and is now seeking parliamentary approval to give permanent legal coverage to authority.
However, the Ministry of Law and Justice, which helped to write the ordinance, stressed that there will be challenges in the implementation of FERA in digital assets.
“Some amendments will be needed in FERA, since it cannot be implemented in digital assets in its current form,” said Shehroz Bakhtiyar, legal consultant of the Law Division, while informing the Committee.
The legislators supported their point of view. “It is simply not possible for the SBP to monitor any outgoing digital transaction due to the nature of these transactions,” said PML-N Senator Affenullah Khan. He said that Pakistanis have invested more than $ 21 billion in digital assets and that it is time for the government to promulgate a law to regularize trade.
Bakhtiyar said it would be binding for licenses to implement the $ 100,000 limit. But he agreed that enforcing the limit would be difficult in practice, given how these markets work.
Pvara provides the broader legal framework for the sector, said the interim vice -governor. He added that the detailed regulatory framework would end later.
Both the Government and the SBP have expressed concern about the implications of the new regime for the economy and the country’s international commitments. The Ministry of Law said that these problems would be addressed through adequate legislation.
Laws and regulations such as FERA, the recommendations of the Financial Action Task Group (FATF) and the Anti-Money Laverening Law would apply to digital assets to make the regime faithful, said the Secretary of Law Raja Naeem Akbar to the Committee.
He said that the foreign companies that deal with digital currencies, such as Binance, would have to establish offices in Pakistan and Fera would also be applicable to them.
Akbar said that Pvara’s bill had been discussed in the Crypto Council of Pakistan. He rejected the impression that the bill was copied from anywhere.
Dr. Hussain said the SBP would issue a digital currency that could be used to buy any digital asset. He said that the value of the digital currency would be equal to the value of the rupee. A bank account holder could deal with both coins in the same account.
He said that once the digital currency is issued, the Central Bank will ask commercial banks about their digital asset needs. Customers would have the option of receiving rupees or digital rupees from their bank accounts, he added.
“The gold standard must be the digital currency of the Central Bank, and should be under the control of the SBP,” said Senator Affanullah Khan.
Bakhtiyar said the Central Bank digital currency would be regulated under SBP law. He said that Pvara would have no regulatory authority to administer the digital currency of the Central Bank.
On a proposal by the PML-N senator, Anusha Rahman, the Committee established the 55-year higher age limit for appointment as Pvara president. The candidate must have at least five years of experience in digital finance and technology. The committee also included a member of the National Assembly and a senator as members of the authority.
For a question, the interim vice -governor said that restrictions on banks and distributors to deal with digital currencies would remain in force until the new legal framework is in force.
At the first Pvara meeting, the SBP blocked a movement to immediately declare the legal digital currencies. He warned that allowing transactions without a regulatory frame could create serious challenges.
The 2018 SBP instructions also declared illegal deals in cryptocurrencies and demanded that banks report that such suspicious transactions to the Financial Monitoring Unit (FMU).
The circular declared that digital currencies such as Bitcoin, Litecoin, Pakcoin, Onecoin, Dascoin, Pay Diamond or Tokens ico are not legal. He said they are not issued or guaranteed by the Government.
The Committee recommended placing Pvara under the administrative control of the Ministry of Finance instead of the Cabinet division to be more effective.
According to the proposed law, digital service providers can offer nine services: advisor, stockbroker, custody, exchange, loans and loans, derivatives of virtual assets, asset management, transfer and liquidation, and token issuance referenced by Fiat.
The committee postponed more deliberations on the bill until its next meeting.
