On April 6, 2018, Muhammad Akhtar Javed, director of the State Bank of Pakistan (SBP), issued a circular entitled "Prohibition of Dealing in Virtual Currencies/Tokens." Virtual currencies and tokens issued through initial coin offerings (ICOs) are not legal tender, he explained, and these digital assets are neither issued nor guaranteed by the Pakistani government.
"SBP has not authorized or licensed any individual or entity for the issuance, sale, purchase, exchange or investment in any such Virtual Currencies/Coins/Tokens in Pakistan," Javed wrote. "All banks/DFIs [Development Financial Institutions]/ Microfinance Banks and Payment System Operators (PSOs)/Payment Service Providers (PSPs) are advised to refrain from processing, using, trading, holding, transferring value, promoting and investing in Virtual Currencies/Tokens."
Javed further declared that these regulated entities "will not facilitate their customers/account holders to transact in VCs/ICO Tokens" and any crypto-linked transactions must be reported as "suspicious transactions" to Pakistan's Financial Monitoring Unit.
It's important to note that the SBP did not explicitly ban the actual use of cryptocurrencies (e.g., if a person bought produce from a grocery store using bitcoin). However, the bank's guidance forbade the conventional financial activities that allow many people to enter the cryptocurrency market. Already, the SBP's guidance has affected virtual currency exchange in the country. Urdubit, a bitcoin trading platform based in Karachi, has shut down.
As one can see, Urdubit's trading volume spiked in the wake of this announcement as customers rushed to liquidate and withdraw their holdings.
According to the raw data, on April 6, the exchange had a volume of 26 BTC before tapering off over the weekend. It's not apparent how many BTC are in the exchange's possession or whether any users failed to remove their funds before Urdubit shut down for good.
Although the exchange communicated its shutdown on its website and via social media, it's unclear whether Urdubit reached out to customers through any other avenues. One Twitter commentator asked why Urdubit had not e-mailed its customers about its closure.
The SBP guidance and Urdubit's announced closure occurred on the same day that the Reserve Bank of India took similar measures against cryptocurrency transactions. Like the SBP, the Reserve Bank of India (RBI) barred regulated entities from working with businesses or individuals dealing with cryptocurrencies. However, the RBI also addressed the possibility of a central bank digital currency.
Last year, ETHNews reported on Pakistan's Federal Board of Revenue, which launched an investigation into possible tax evasion and money laundering that might have been carried out through bitcoin trading.