Credit Given By Moody’s To State Bank of Pakistan On Banning Of Virtual Currencies
Credit Given By Moody’s To State Bank of Pakistan On Banning Of Virtual Currencies: Moody’s Investors Service which is United States credit rating agency credited SBP latest restriction on banks to deal in virtual currencies.
“The ban is credit positive because it protects Pakistan’s banks and other financial service entities from the significant risks that virtual or crypto currencies pose,” Moody’s said in a statement. “The (Pakistan) authorities welcome the entry of financial technology companies in the market, especially in the payments system sector, as part of Pakistan’s national financial inclusion strategy, which aims to bring more people in the formal financial sector,” Moody’s added.
The State Bank of Pakistan (SBP) stopped the banks, payment system operators and service providers from dealing in virtual currencies or facilitating customer’s transactions in them. SBP clearly announced that it has not offered any authorization or license to individuals or entities to engage in any activity (issuance, sale, purchase, exchange or investment) in virtual currencies.
This ban would protect them from monetary and other risks. US credit rating agency said Pakistani banks are generally inactive in the area of virtual currencies.
Regulatory challenges associated with virtual currencies are yet to be resolved internationally. Therefore SBP action is in accordance with other regulatory bodies over the globe. Crypto or Virtual currencies is yet to reach international consensus to legalize its use. The central bank has warned the public already, in line with other authorities such as the European Banking Authority for not using it. It has strictly warned that there could be legal repercussions in cases where crypto currencies are used to transfer funds outside Pakistan.
Under State Bank of Pakistan (SBP) Ruling for Virtual Currencies
- Banks not to facilitate in any way their customers transacting in virtual currencies.
- It applies to the full spectrum of financial services banks offer, including the use of bank transfers, credit cards or consumer loans that customers can use to invest in virtual currencies.
Risks Involved With Crypto Currencies
The use of virtual currencies has following risks as per SBP:
- Significant price volatility tied to speculative activity
- Threat of failure or closure of crypto currency exchanges owing to various reasons including law enforcement actions
- Susceptibility of crypto currency exchanges to hacking/security compromises
- The increased risk for illegal activities through the high degree of anonymity that virtual currencies offer, which makes tracking and documenting these transactions difficult.
Spokesperson SBP stated that the bank is not against the latest block chain technology of virtual currencies however measures are under process to enhance its supervisory capacity that will allow the use of new technologies in the future.
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