Pakistan considers new regulation for digital currency

The securities regulator of Pakistan is considering introducing a system of regulation for digital currencies, according to recent reports.

The Securities and Exchange Commission of Pakistan outlined its thinking in a research paper published last week, looking comparatively at the approach of regulators in other countries, as well as setting out the needs of Pakistan’s growing digital finance market.

The document describes digital assets as the “start of a new era of digital finance” which can “only be possible by initiation of a new era that re-invents regulatory regime [or] measures as they are known to the regulators globally today.”

The consultation paper specifically addresses several issues around privacy-focused cryptocurrencies and the need for regulating tokens such as BTC. However, it stops short of dealing with the issues around central bank digital currencies, or CBDCs, despite the country’s central bank previously suggesting it was planning to launch a digital currency by 2025.

In particular, the report looks at two types of tokens: utility tokens and security tokens. On security tokens, the regulator highlights the benefits of fractionalized assets, which it says could lower barriers to entry for investors. The report also cites liquidity, transparency and greater scope for automation amongst the many benefits possible with security tokens.

The securities regulator is said to be continuing its engagement with industry, and is actively seeking input from digital currency companies in developing its new legal framework.

Pakistan has been slow to respond to the need for regulation in the emerging digital finance industries, only announcing plans for regulation of electronic money institutions in 2019. Recently, a lawyer for Pakistan’s State Bank refuted claims that it has banned digital currency or digital currency-related businesses in the country.

With the plans outlined in the consultation document, the regulator will be hoping to catch up with efforts from regulators elsewhere in bringing in more defined regulation for the digital currency sector.

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