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Pakistani traders take advantage of loopholes in country’s bitcoin ban

Pakistani traders take advantage of loopholes in country's bitcoin ban

Crypto ban in Pakistan has not proved to be as effective as expected. The State Bank has ordered local exchanges to cease operations and has barred financial firms from dealing in digital currencies. But, individual traders in the country have been coming up with unique ways to dodge regulations and enjoy the fruits of bitcoin trade.

Pakistan is a classic example of banks forgetting their regulatory limits. They are not the government, or parliament and their regulatory approach cannot challenge the legal system of the country.

Earlier this year, SBP, State Bank of Pakistan, issued a circular named “prohibition of dealing in virtual currencies” after a similar action was taken by the Reserve Bank of India. Unlike their neighbor, Pakistan didn’t give a time limit to its citizens for settling their deals with exchanges. Every financial entity or service providers were advised to stop their operation immediately.

According to CEO Urdubit, Pakistan’s first bitcoin exchange, Danyal Manzar, before the ban, the platform was able to trade almost 100 different virtual coins on a daily basis. He was forced to close down his exchange as he thinks that “The decision was made in haste. Ample time should always be provided for a proper shutdown. But we respect the SBP’s decision.”

The exchange requested its users to withdraw all their holding after the ban was imposed. However, it’s been a month since the ban yet some users still hold bitcoin in their accounts. Manzar believes that people do have alternative ways to trade bitcoin even after increased risk. He believes that digital currencies will not have a great impact on the entire monetary system of the country. He said, “About 80 to 85{d433fa1c024495e3d30fb9a8ae174a80907308b9b8a5f0e72f30e7e693d34bc9} of the traders from stock exchanges came to try their luck in virtual currency.”

The crypto traders from Pakistan informed that PSB’s ban initially pulled the market down, but trading volumes saw a rise after they discovered new means to trade bitcoin. Majid Ali, a trader from Lahore, said, “Traders realized that the SBP hasn’t, and can’t ban cryptocurrency in Pakistan. What the State Bank has done is ban banks from entertaining crypto, so if you’re not dealing via banks, you [still] can own and trade virtual currency in Pakistan, which comes under the IT ministry.”

Pakcoin, Pakistan’s only digital coin has also seen a rise in its value by 60{d433fa1c024495e3d30fb9a8ae174a80907308b9b8a5f0e72f30e7e693d34bc9} after the ban. Its founder Abu Shaheer stated that ban had promoted his coin to people who he could never reach which has made them interested in Pakcoin. The currency is currently used as a coupon to recharge mobile phones.

People related to Pakistan’s Ministry of Information Technology and Telecommunication has acknowledged that government has no plans to declare digital currencies illegal. It should be noted that neighboring countries like China and India have taken strict steps against digital currencies. Pakistan allowing its citizens to trade bitcoin hints their interest in the growth of their crypto space. All in all, it is good news for the crypto community as a whole.

About the author

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Brian Booker

An international financial analyst and writer. He has consulted for the Malaysian government, various MNC’s, and other organisations. He focuses on currencies, commodities, and emerging South East Asian markets.

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