Cryptocurrencies have emerged as a revolutionary financial technology, gaining widespread acceptance and adoption globally. While regulatory approaches vary from country to country, the legal status of cryptocurrencies in Pakistan remains somewhat ambiguous. It is crucial to establish that holding or owning cryptocurrency should not be considered an offense under Pakistani law. This position is supported by fundamental legal principles, the current regulatory framework, the economic benefits of cryptocurrencies, and constitutional rights.
1. Principle of Legality
The principle of legality, or "nullum crimen sine lege" (no crime without law), is a cornerstone of criminal law. This principle asserts that an act cannot be deemed a crime unless it has been clearly defined as such by law.
No Specific Prohibition: As of now, there is no specific law in Pakistan that explicitly criminalizes the mere possession or ownership of cryptocurrencies. In the absence of such legislation, individuals cannot be prosecuted for an act that has not been explicitly defined as illegal by the law.
Vague Regulations: The State Bank of Pakistan (SBP) issued a circular in April 2018, which prohibits financial institutions from providing services related to virtual currencies and tokens. However, this circular does not criminalize the holding of cryptocurrencies by individuals. It merely restricts the activities of regulated entities under the SBP’s jurisdiction, such as banks and payment service providers, from dealing with or facilitating transactions in virtual currencies.
2. Regulatory Ambiguity
The existing regulatory framework in Pakistan lacks clarity regarding the legal status of cryptocurrencies for individual holders and users.
Lack of Clear Legislation: The absence of comprehensive and specific legislation on cryptocurrencies means there is no clear prohibition against owning or holding them. Regulatory ambiguity should be addressed through clear legislative action rather than criminal prosecution.
International Precedents: Many countries around the world have opted to regulate rather than criminalize cryptocurrencies. For instance, in the United States, the European Union, and Japan, holding cryptocurrencies is legal, and regulatory frameworks have been established to address issues such as money laundering, consumer protection, and taxation. Pakistan can look to these examples to develop its own regulatory framework.
3. Economic and Technological Benefits
Cryptocurrencies and blockchain technology offer significant economic and technological benefits that should be considered in shaping regulatory policies.
Innovation and Investment: Cryptocurrencies and blockchain technology drive innovation and attract investments. Countries that have embraced these technologies have seen substantial economic growth and technological advancements. By fostering a regulatory environment that encourages innovation, Pakistan can benefit from the influx of investment and the development of a vibrant fintech sector.
Financial Inclusion: Cryptocurrencies can promote financial inclusion by providing access to financial services for unbanked and underbanked populations. This aligns with Pakistan’s goals of enhancing financial inclusion and economic development, as a significant portion of the population remains without access to traditional banking services. Cryptocurrencies can offer a secure and efficient alternative for financial transactions and savings.
4. Constitutional Rights
Prosecuting individuals for holding or owning cryptocurrencies may infringe upon their constitutional rights.
Right to Property: Article 23 of the Constitution of Pakistan guarantees the right to acquire, hold, and dispose of property. Cryptocurrencies, being a form of digital property, should be protected under this provision. Criminalizing the possession of cryptocurrencies without clear legislative backing would infringe upon this fundamental right.
Right to Privacy: Article 14 of the Constitution protects the privacy of individuals. Arbitrary interference with individuals’ private financial affairs, including their holdings of cryptocurrencies, may constitute a violation of this right. Regulatory measures should respect individuals' privacy while ensuring transparency and compliance with legal requirements.
5. Need for Regulatory Clarity
Rather than criminalizing the holding or owning of cryptocurrencies, the focus should be on establishing a clear and comprehensive regulatory framework.
Regulation over Prohibition: A regulatory approach that sets out clear rules for the use, trading, and taxation of cryptocurrencies would provide legal certainty and protect consumers, investors, and the financial system. Regulation can help create a balanced environment where the benefits of cryptocurrencies can be harnessed while mitigating potential risks.
Preventing Illegal Activities: Effective regulation can help prevent illegal activities such as money laundering and terrorist financing, which are often cited as concerns associated with cryptocurrencies. This can be achieved through know-your-customer (KYC) and anti-money laundering (AML) measures. Proper regulation ensures that cryptocurrencies are not used for illicit purposes while allowing legitimate use and innovation.
Conclusion
In conclusion, holding or owning cryptocurrency in Pakistan should not be considered an offense. The principle of legality, the current regulatory framework, economic benefits, constitutional rights, and the need for regulatory clarity all support this position. It is essential for Pakistan to adopt a balanced and forward-looking approach to cryptocurrencies, focusing on regulation rather than prohibition. This approach will enable Pakistan to benefit from the technological and economic advancements associated with cryptocurrencies while ensuring legal compliance and protection for its citizens. By establishing clear regulations, Pakistan can foster innovation, attract investment, and enhance financial inclusion, ultimately contributing to the country's economic growth and development.
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Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal or financial advice.
Author & Crypto Consultant
Shahid Jamal Tubrazy (Crypto & Fintech Law Consultant)
Shahid Jamal Tubrazy, a certified top expert in Crypto Law from Duke University, specializes in #cryptocurrency and #blockchain. As a #FintechLawyer, his services cover legal guidance for #ICOs, #STOs, #DeFi, #DAO, and more. With a strong track record and published books on #BlockchainRegulation and #cryptocurrencyLaws, he offers comprehensive expertise in navigating fintech's complexities. #CryptoAML #LockedAssets #FrozenAssets 🌐💼.
EMAIL: shahidtubrazy@gmail.com
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