Bitcoin is a digital currency that has gained immense popularity over the past few years. It allows people to conduct transactions without the need for an intermediary, such as a bank. However, in Pakistan, the use of bitcoin is banned. In this article, we will explore why bitcoin is banned in Pakistan.
The State Bank of Pakistan (SBP), the country’s central bank, issued a circular on April 6, 2018, which prohibited all financial institutions from dealing in cryptocurrencies. The circular stated that “virtual currencies (VCs) pose potential risks to the economy” and that “no entity shall be allowed to undertake any transaction in VCs with any individual or entity.” This effectively banned the use of bitcoin in Pakistan.
The SBP’s decision to ban bitcoin was based on several reasons. Firstly, the bank is concerned about the anonymity of bitcoin transactions. Unlike traditional financial transactions, bitcoin transactions are not linked to a person’s identity or bank account. This makes it difficult for law enforcement agencies to track illegal activities, such as money laundering and terrorism financing, that may be facilitated through the use of bitcoin.
Secondly, the SBP is concerned about the volatility of bitcoin prices. The value of bitcoin can fluctuate rapidly, making it a risky investment. This volatility also makes it difficult for businesses to price their goods and services in bitcoin, as the value of the currency can change dramatically within a short period of time.
Thirdly, the SBP is concerned about the lack of regulation of bitcoin. Unlike traditional financial institutions, there is no regulatory body that oversees the use of bitcoin. This makes it difficult for the SBP to ensure that transactions are conducted in a safe and secure manner.
Finally, the SBP is concerned about the potential impact of bitcoin on the country’s foreign exchange reserves. If a large number of people start using bitcoin, it could lead to a reduction in the demand for the Pakistani rupee. This could have a negative impact on the country’s economy, as it could lead to a decrease in the value of the rupee and an increase in inflation.
In addition to the SBP’s concerns, there are other reasons why bitcoin is banned in Pakistan. For example, the country’s tax authorities have expressed concerns about the use of bitcoin for tax evasion. Since bitcoin transactions are not linked to a person’s identity, it is difficult for tax authorities to track them and ensure that people are paying the appropriate amount of taxes.
Furthermore, religious leaders in Pakistan have also expressed concerns about the use of bitcoin. Some have argued that it is a form of gambling, which is prohibited in Islam. Others have argued that it is a tool for criminals and terrorists, and that its use should be banned to prevent these groups from using it.
In conclusion, bitcoin is banned in Pakistan due to a variety of reasons, including concerns about anonymity, volatility, lack of regulation, impact on foreign exchange reserves, tax evasion, and religious concerns. While some people in Pakistan may still use bitcoin despite the ban, it is important to recognize the risks associated with its use and to take steps to ensure that transactions are conducted in a safe and secure manner.