On December 19, 2017, Abdellatif Jouahri, governor of Bank Al-Maghrib, said at a press conference in Rabat during the last quarterly board meeting of Bank Al-Maghrib in 2017 that Bitcoin is not a currency, but a “financial asset”. He also warned of the dangers and called for the creation of a framework for consumer protection. [16] The adoption of cryptocurrencies has begun to gain momentum in the country. Chainalysis` 2021 Global Crypto Adoption Index ranked Pakistan third in the world. Earlier this year, Khyber Pakhtunkhwa province announced plans to build cryptocurrency mining pilot farms. At the federal level, a committee has been formed to investigate cryptocurrency regulation. These are promising developments. However, there is so much more to accomplish and there is a small window of opportunity to act. In December 2020, the Khyber Pakhtunkhwa Provincial Assembly unanimously passed the resolution to legalize cryptocurrency and cryptomining (The Express Tribune, 2020). In October 2015, the Court of Justice of the European Union ruled that “the exchange of traditional currencies for units of the virtual currency `Bitcoin` is exempt from VAT” and that “Member States must, among other things, exempt transactions relating to “legal tender currencies, notes and coins””, making Bitcoin a currency and not a commodity. [4] [5] According to the judges, the tax should not be levied because bitcoins should be treated as a means of payment. [6] Pakistan has several ways to benefit from the Bitcoin ecosystem. Our team believes Bitcoin is poised to outperform traditional assets in the future.
Before the Bitcoin price crosses the country`s affordability threshold, we propose to the State Bank of Pakistan to first convert up to 5% of its government gold reserves (about $180 million) into this asset. The bullish scenario can have a positive impact on the state of the country`s asset reserves. Economists have watched with fascination as the country of El Salvador prepares to become the global pioneer in accepting Bitcoin as legal tender. The Legislature voted to accept Bitcoin as one of the country`s two official currencies. The Autorité des marchés financiers (FMA) has warned investors that cryptocurrencies are risky and that the FMA does not monitor or regulate virtual currencies, including Bitcoin, or cryptocurrency trading platforms. [14]: 30–31 However, outside of jurisdictions that have explicitly banned cryptocurrency-related activities, very few countries prohibit cryptocurrency mining. Cryptocurrencies, including Bitcoin, are not officially regulated in Pakistan; [92] [93] However, it is neither illegal nor prohibited. As of January 16, 2021, the State Bank of Pakistan had not authorized any person or organization to carry out the sale, purchase, exchange and investment of virtual currencies, coins and tokens. [94] There have been a number of arrests by the cybercrime wing of the Federal Investigation Agency (FIA) in connection with the mining of Bitcoin and other cryptocurrencies. These arrests were made for money laundering. [95] With the help of the Internet and a smartphone, the average Pakistani investor has the opportunity to plug into the world`s best-performing asset of the past decade.
These unprecedented returns will create wealth for investor households, stimulate local economies in the form of additional demand, and generate capital gains taxes. We recommend that the State Bank of Pakistan and the Securities Commission provide access to this asset class to all Pakistani investors. The movement between the Bitcoin ecosystem and traditional financial institutions must be a low-cost, frictionless endeavor. A fully regulated national cryptocurrency exchange should be introduced with incentives to attract domestic participation. Bitcoin ETF trading on the Pakistan Stock Exchange offers an attractive investment for local investors who desperately need diversified exposure. We propose that the federal government take advantage of this situation. The excess supply of electricity coupled with an already budgeted expense is too good to miss. In addition, the recent reduction in the network`s hash rate makes it economically attractive to start mining operations immediately.
Bitcoin mining farms should be installed near power plants to minimize transmission losses. Used mining equipment offers a cost-effective entry into the future. Finally, the government may choose to maximize production from mining farms during the winter months, when local demand is relatively low. If Bitcoin prices continue to rise according to our expectations, this would be another way for the federal government to generate massive revenue. According to a recent article in Dawn: “If Pakistan uses this energy for Bitcoin mining with the latest S19 Pro Antminer (assuming 10,000 MW of excess energy at a cost of $0.12 per kW/hour), it can generate $35 billion worth of Bitcoin per year at current valuations. Simply put, this means that we can repay our external debt in two years” (Khwaja, 2021). The legal status of cryptocurrencies varies greatly from jurisdiction to jurisdiction and is not yet defined or changes in many of them. [1] While the use of cryptocurrency per se is not illegal in most countries, its status and ease of use as a means of payment (or commodity) varies with various regulatory implications. [2] The U.S. Treasury Department classified Bitcoin as a convertible decentralized virtual currency in 2013.
[33] The Commodity Futures Trading Commission, CFTC, classified Bitcoin as a commodity in September 2015. According to the Internal Revenue Service (IRS), Bitcoin is taxed as property. [34] The Commission de Surveillance du Secteur Financier issued an opinion in February 2014 recognizing the status of the currency for Bitcoin and other cryptocurrencies. [184] The first BitLicense was issued in October 2015. [185] On April 16, 2021, the Central Bank of the Republic of Turkey issued a regulation prohibiting the use of cryptocurrencies, including Bitcoin and other digital assets based on distributed ledger technology, directly or indirectly to pay for goods and services, highlighting possible “irreparable” damage and transaction risks as of April 30, 2021. [73] [74] However, in a sudden reversal of events, on September 28, Congress. In May 2021, it was announced that the Khyber Pakhtunkhwa government had dissolved the Digital Assets Advisory Committee on the grounds that decisions on digital currencies could only be made by the federal government. No news has been announced regarding cryptocurrency mining farms and related investments in the province (Ahmed, 2021). In 2013, the G7 Financial Action Task Force issued the following statement in the guidelines that may apply to businesses involved in the transfer of bitcoin and other currencies: “Internet-based payment services that facilitate third-party funding from anonymous sources may be exposed to an increased risk of [money laundering and terrorist financing].” They concluded that this “could pose regulatory and supervisory challenges for countries [to combat money laundering and terrorist financing].” [12] The European Union has not adopted specific legislation regarding the status of Bitcoin as a currency, but has stated that VAT/GST does not apply to the conversion between traditional currency (fiat) and Bitcoin. Bitcoins can be considered money, but not legal tender. A bitcoin may be considered a commodity or item under the Argentine Civil Code, and transactions involving bitcoins may be subject to the rules governing the sale of goods under the Civil Code. [3]: Argentina On May 5, 2022, Argentina`s central bank banned financial institutions from facilitating cryptocurrency-related transactions.
[49] The use of Bitcoin is not regulated in Cyprus. [3]: Cyprus Crypto is not legal tender in Georgia, but there are currently no regulations from the National Bank of Georgia that prevent it from being used as barter. [152] The closure of Chinese miners has resulted in second-hand mining machines flooding the market at significantly reduced prices. This oversupply should help reduce the initial investment needs for the establishment of the mining farm. This timing works well for anyone looking to set up a new mining operation. There is not a single word in Bulgarian Bitcoin laws. People owe 10% tax if they make profits from trading. The now-defunct Chinese miners are in the process of relocating their operations to another jurisdiction or selling their mining equipment on the secondary market at discounted prices (Reuters, 2021). Eventually, this lost hash power will return to the Bitcoin network. Financial institutions are not allowed to facilitate Bitcoin transactions.
[14] The regulation prohibits financial companies that hold or trade cryptocurrencies. [8]: China On December 5, 2013, the People`s Bank of China (PBOC) took a first step towards regulating bitcoin by banning financial institutions from processing bitcoin transactions. [97] All reservations are justified, at least in part. The ongoing collapse of the crypto market is a fitting example of the inherent price volatility that could reverse traces of stability overnight. More than $300 billion was wiped off the markets in four days, largely due to heavy speculation.