THE investigation launched by the cyber crime wing of the Sindh FIA against multiple mobile apps linked to the largest global crypto exchange, Binance, for scamming Pakistani investors out of their investments of nearly $100m in digital currencies points to the absence of a regulatory regime to make the crypto market a safer environment.
The SBP and SECP, the two regulators of the financial and corporate sectors, have practically done nothing so far to develop regulations despite Pakistanis’ increasing interest in the crypto business owing to unbelievable returns, and a rapid growth of online sites facilitating trading in virtual currencies from the country. Nor has the PTA, the regulator of the digital space, moved an inch to regulate the online sites to prevent potential frauds.
Each regulator points to the absence of an umbrella federal legal framework under which they can develop crypto regulations.
Although the federal government has constituted a committee to suggest regulations, it has made no progress in months since most of its members have no clue about cryptocurrency or what this business is about.
The fact there is also no clarity on the mode of crypto transactions in spite of bank accounts being maintained by the crypto mobile apps and the claim of the US-based data and software provider, Chainalysis, that Pakistan had received nearly $1.5bn in cryptocurrency in FY20 shows these transactions are happening off the books. That demands seriousness on the part of the regulators and federal authorities on the matter.
Given the FATF noose hanging around our neck, the absence of a crypto regulatory framework is even more worrisome if the money is moving out or into the country through illegal channels.
Regulating crypto business is not easy. But many countries have developed effective legal frameworks to stop crypto exchanges and mobile apps from operating in their territories unless they agree to register their businesses in the host jurisdictions.
No government can stop crypto. But the sooner this business is regulated, the better for the country and investors.
Published in Dawn, January 10th, 2022
