FATF Rules Force Pakistan to Ban Crypto Despite Socio-Economic Crisis

Key Takeaways:

• State minister Aisha Ghaus Pasha announced that cryptocurrencies would never be legal in Pakistan.
• Pakistani citizens still see a hedging opportunity in crypto.
• Pakistan’s banks started to warn their clients against using crypto in April 2023.

YEREVAN (CoinChapter.com) — Pakistani government has started cracking down on the crypto sector. The hard-hitting measures appear even as retailers use tokens like Bitcoin to hedge against a dwindling Pakistani rupee.

On May 17, Minister of State for Finance and Revenue Aisha Ghaus Pasha confirmed that cryptocurrencies will “never be legalized in Pakistan.”

She cited Financial Action Task Force (FATF) as the core inspiration behind their strict outlook toward cryptocurrencies, eventually ruling out that they could not be legal tender in Pakistan.

The regulatory crackdown appears as Pakistan strives to stay out of FATF’s “grey list.”

The “Grey List” categorizes countries that, by the FATF metrics, impose weak measures to combat money laundering and terrorist financing. The FATF has always been exceptionally attentive toward virtual assets.

The stance of Pakistan’s banks

Pasha also stated that the State Bank of Pakistan (SBP) and the Information Technology Ministry had been ordered to work on banning crypto. In January 2022, the SBP shared its plans to ban crypto altogether.

In April 2023, ”The Dawn” news outlet reported that Pakistani banks have started to formally warn their customers against using debit or credit cards for crypto exchange.

As claimed by Zeeshan Ahmed, general manager at crypto trading platform Rain Financial, cryptocurrencies have been gaining popularity in Pakistan, citing the growing annual trading volume; it surged from up to $25 billion in 2023 from the last year’s $18 billion.

The reactions and sentiments

The Pakistani crypto community expressed their dissatisfaction with the recent state decision.

On May 17, Twitterati Crypto Pakistan said that the officials had destroyed Pakistan in the name of FATF and the International Monetary Fund (IMF). His statements appeared reflective of Pakistan’s highly acute economic and political crisis.

For instance, Pakistan’s Rupee (PKR) has slid 3.3% to 300 per the U.S. dollar.

Ali Farid Khwaja, chairman of KTrade Securities and CEO of BlockTech Pakistan, said to Coindesk that Pakistanis fear a sovereign default since their government failed to secure the International Monetary Fund’s support.

The executive admitted that many people in Pakistan are buying USDT, a stablecoin backed by Tether, to get exposed to the dollar. However, he added that even Bitcoin had performed well against the ailing Pakistani Rupee, noting that more than 20 million Pakistanis had opened accounts on crypto platforms.

The investor also said that stablecoins had been the most convenient way to access U.S. dollars for most of the Pakistani population since the import restrictions hindered the acquisition of physical dollars.