ISLAMABAD: The biggest challenges with regards to cryptocurrency in Pakistan are the lack of knowledge and the need for initial capacity-building for regulators, stakeholders at a meeting with the Ministry of Finance said on Tuesday.

There is a potential of around $90 million if a capital gains tax is imposed on crypto assets, said RAIN Pakistan general manager Zeeshan Ahmed.

One of the key international players in the field and the first licenced crypto asset company, RAIN has suggested the government tax crypto assets and formulate regulations in this regard.

“The west has acknowledged that crypto assets continue to be traded in the grey areas, likewise they are traded in Pakistan,” Mr Ahmed said.

“We suggest that, as Europe has done so and Gulf countries have recognised it, Pakistan should tax and regulate crypto assets too,” he added.

In their meeting with the finance ministry officials, the RAIN executives highlighted that crypto was a very new arena and without the requisite due diligence and technical guidance.

The ministry was informed that Pakistanis were vulnerable to fraud while trading in crypto assets through irregular means.

There are over 8,000 crypto currencies being traded over the dark web. A majority of these are fraudulent and do not provide any protection to investors. Therefore, recognition of this activity was needed.

They suggested that to counter this challenge, RAIN will share its experience as the first licence holder to operate a crypto brokerage and a crypto exchange in the Gulf region. The company operates over 80 crypto currencies and fulfils all regulatory requirements.

While the stakeholders have already turned down the immediate launch of cryptocurrency and crypto assets in the country, the international players have been demanding the authorities to follow the global path and harness the potential of digital currency.

“No country or individual can remain away from the upcoming digital trends and developments,” said Aatiqa Lateef, the director of Public Policy at RAIN.

Briefing the media over the importance of crypto assets in any modern economy, she said that relevant officials from 44 developing and underdeveloped countries are meeting in El Salvador over crypto asset regulations.

“Cryptocurrency or crypto assets, as they are called differently in various jurisdictions, have been largely adopted by advanced economies,” Ms Lateef said.

“But the El Salvador meeting is to discuss the best regulatory framework for less advanced economies,” she added.

The media was informed that while major businesses, including Starbucks and Emirate Airlines, have started to receive payments in crypto currencies, India has imposed a 31 per cent tax on profits from them.

“This was the first time crypto exchanges have started to get registered with a tax collection body in India,” Mr Ahmed said, and the formulation of laws continues.

RAIN officials said local challenges are primarily around building capacity and understanding of crypto assets.

Pakistan ranks third globally in crypto subscriptions and usage is growing rapidly.

Meanwhile, the Sindh High Court has directed the law and finance ministries to finalise the matter. Earlier the Securities & Exchange Commission of Pakistan and the State Bank of Pakistan decided to disown cryptocurrency on the ground that it could invite the ire of the International Monetary Fund and the Financial Action Task Force.

Published in Dawn, May 18th, 2022