This article briefly:

· Pakistan has banned crypto services and will never legalize cryptocurrency trading, according to a government official.

· The ban is partly in response to concerns about terrorist financing and money laundering.

· Pakistan is currently facing an economic crisis of high inflation and increasing debt burden.

Following previous announcements, Pakistan is enacting a far-reaching ban on crypto services, with Minister of State for Finance and Revenue Aisha Ghaus Pasha even declaring that cryptocurrencies will never be legal in the country.

In response to threats from a few months ago, Pakistan decided to impose a strict ban on encrypted services over the internet. Pasha told a meeting of the Senate Standing Committee on Finance and Revenue on May 16 that Pakistan will ban online cryptocurrency services within the country and will not change course, local news source ProPakistani reported on Wednesday.

The decision was supported by other officials, including State Bank of Pakistan (SBP) Governor Sohail Jawad. Pasha stated that the government will deny the legal status of cryptocurrencies in Pakistan indefinitely.

Pakistan will 'never' legalize cryptocurrencies

The central bank and federal government proposals were first reported by local media on January 12, 2022.

This is the first time the State Bank of Pakistan has taken a public stance on the crypto asset class, with the Sindh High Court previously urging the government to regulate digital currencies in October 2020.

Salim Mandviwala, chairman of the committee, noted that Pakistanis have invested billions of dollars in cryptocurrencies. In December, the Federation of Pakistan Chambers of Commerce and Industry said Pakistanis invested $20 billion worth of funds in 2021.

Pasha said the Financial Action Task Force (FATF) called for a ban on cryptocurrencies as one of the conditions for removing Pakistan from its gray list in October, which includes countries the group considers to have deficiencies in anti-money laundering and counter-terrorism financing.

Countries have tried various measures to avoid the stigma of landing on a blacklist or greylist, such as implementing strict "know your customer" procedures, but FATF has struggled to satisfy.

The ban may mean that the exchange will cease official operations in the country. However, citizens will likely be able to access encrypted services through unofficial channels such as VPNs.

pakistan economic crisis

Pakistan is currently in an economic crisis. Its inflation rate of 36.4% as of April is not a huge outlier globally, but it is the country's highest figure since the mid-1970s.

Over the past 25 years, Pakistan's debt has doubled approximately every five years to Rs 20 million. 62.5 trillion by the end of Imran Khan’s government in 2022, and GDP growth will be much slower.

This unsustainable debt burden has resulted in debt service obligations exceeding federal government revenue in the 2022-23 financial year. The economic crisis played a role in the political deadlock between Prime Minister Shahbaz Sharif and former Prime Minister Imran Khan, leading to Khan's ouster and nationwide unrest, calling for early elections.

Despite attempts to secure an International Monetary Fund loan, the Khan government has failed to address inflation and improve economic conditions.