Senate finance committee directs SBP to prohibit cryptocurrency in Pakistan

ISLAMABAD: The Senate Standing Committee on Finance and Revenue has directed State Bank of Pakistan to prohibit cryptocurrency in Pakistan.

The meeting of the committee was held under the chair of Senator Saleem Mandviwala on Wednesday at Parliament house.  

SBP officials informed the committee that the Central Bank in 2018 prohibited its regulated entities from dealing in virtual digital currency also known as cryptocurrency, keeping in view the number of frauds reported through crypto currency including frauds of $2 billion in Turkey by an exchange company. 

They said that the global crypto market cap had shrunk from $2.8 trillion to $1.2 trillion and Federal Investigation Agency (FIA) and the Federal Board of Revenue’s Financial Monitoring Unit (FMU) were monitoring Pakistani investments in cryptocurrencies on a regular basis and that an investigation was currently underway.

SBP officials further said that over 16,000 types of different cryptocurrencies had been created so far, adding that cryptocurrencies are a high-risk investment.

Officials called the exchange medium a “total fraud” and said it should never be legalized in Pakistan.

Committee chairman Salim Mandviwala said that Pakistanis had invested billions of dollars in the contentious financial instrument. He also directed authorities to block cryptocurrency services and websites dealing with the instrument in Pakistan.

Minister of State for Finance and Revenue Dr. Aisha Ghaus Pasha informed the committee that cryptocurrencies will never be legalized in Pakistan. She said the Financial Action Task Force (FATF) had imposed strict conditions on the usability and viability of cryptocurrencies, therefore this medium of exchange will not be allowed in Pakistan.

Following extensive deliberations on the issue, the standing committee directed authorities to prohibit the use of cryptocurrencies in Pakistan.

Briefing by the SECP on media reports regarding proposed amendments to Non-Banking Finance Companies and Notified Entities Regulations. SECP officials said that reports pertaining to the increase in its fees on AMC’s by over 350 % to the original level, which was reduced after detailed deliberations by the SECP policy board in fiscal year 2020, are baseless. 

It was briefed that the policy board has the power and mandate to specify fees chargeable by the SECP and SECP implements the fees as approved by the policy board. It was briefed that the policy board of the SECP along with other private members comprises Secretary Finance Division, Secretary Law, Secretary Commerce and Deputy Governor State Bank who are permanent members. It was apprised that the rates of fees have been revised to the level of 2019 after detailed deliberation and careful analysis in the Financial position and autonomy of SECP.

The meeting was informed that this is not an increase but a reversion to the 2007 level.  The meeting was also informed by an SECP official that the amendments have been made after detailed deliberation with industry stakeholders including MUFAP.  The meeting discussed that SECP is only charging annual fees from mutual funds whereas in other jurisdictions multiple fees including approval of funds, registration of fund, annual fees, filing fees are also imposed.

While taking briefing by the FBR on the Capital Value Tax, on local and foreign assets of taxpayers introduced in the Finance Act 2022. 

The meeting was informed that CVT was levied on foreign assets of resident individuals exceeding Rs 100 million in value, and motor vehicles exceeding battery power of 1300 cc/ 50 kWh. Similarly the value of assets to be determined in case of foreign assets is the total cost of foreign assets on the last day of the tax year converted into Pakistan rupee at SBP notified exchange rate as on 30th June, 2022.

The meeting was also told that collection of CVT of Rs 3,194 million and Rs 6,045 million from foreign assets has been made since the operationalizing of this law. As a result of tax policy shift the direct tax collection has for the first time surpassed all individual indirect taxes as direct tax (income tax/CVT) 45%, Sales tax 42 % and custom duty 13 %.

Senator Dilawar Khan recommended direct tax collection at district level and said it will give fruitful results. Aisha Ghaus Pasha, State Minister for Finance said that this has been tried earlier but was not workable. 

The Chairman Committee called for an in camera meeting to take briefing on all such regimes and its implementation mechanism. 

The Senate Standing Committee also decided to hold pre-budget meetings with all the relevant stakeholders from next week to take their suggestions for incorporating in the budget for the next fiscal year.

Senator Sadia Abbasi proposed that the committee should invite all the stakeholders in the meetings with the objective to hear their suggestions and concerns and thereby recommending the government to incorporate them in the upcoming budget. The committee endorsed this view point with the decision of holding meetings most probably from next week.

A breifing was also taken on the delay in implementation of the decision of the Finance Committee by the Ministry of Finance regarding additional PSDP demand for project protection and upgradation of Pak-China OFC project for establishment of cross border connectivity (Dassi-Danyore alignment).

Senator Umer Farooq regretted that new projects are being funded whereas projects near to completion are not allocated funds. The committee lamented the mismanagement and mysterious working of the ministry of IT & T and the planning commission on the allocation of funds and its disbursement. The chairman committee reiterated the release of funds of 608 M rupees in order to close the project. The committee sought a report on the same from the IT ministry.