Pakistan seems to realize the potential of digital assets in the financial future as the country seems geared up for formulating a new framework to regulate cryptocurrencies such as bitcoin. This is highly bullish since Pakistan was among the very few countries that in mid-2018 blanket banned digital assets in any form. It wasn’t until April of 2019 that regulators started to change their minds.
The Securities and Exchange Commission of Pakistan (SECP), on November 6th, released a consultation paper about regulating digital assets. The paper mentioned that the finance ministry is looking to make new laws as they look at the regulatory frameworks set by other countries.
SECP believe digital assets is a “start of a new era of digital finance.” The consultation paper further noted that to propel this new digital finance era, a new set of frameworks would be required to drive its adoption.
“Digital assets also known as Virtual Assets, and Crypto Assets are the start of a new era of Digital Finance, and demand innovative regulatory measures and approaches by the regulators across the world.
This could only be possible by initiation of a new era that re-invents regulatory regime/measures as they are known to the regulators globally today.”
It is also important to note that many developed countries in the West are currently discussing launching a Central Bank-issued Digital Currency (CBDC); however, the consultation paper makes no mention of any such plans by Pakistani financial watchdog. At present, they are only focusing on regulating private digital assets such as bitcoin.
The paper made a note of two types of tokens, namely security tokens and utility tokens, where the regulatory body sees a security token as an important tool that might help in fractionalizing real-world assets and digitize them.
The paper mentions that they have 2 choices as regulators; restrict digital assets due to current rules or take a ‘let-things-happen’ approach. Which they mention that they are heavily leaning towards the do-no-harm approach.
The paper also welcomed feedback from the stakeholders of the decentralized space in developing the new framework.