Pakistan to tighten oversight of crypto services

The Pakistani government has finalized the Virtual Asset Service Provider (VASP) Regulations, which imply stricter monitoring of digital asset transactions. These measures are aimed at enhancing the security of the virtual asset market and ensuring compliance with international standards, including the Financial Action Task Force (FATF).

New Rules for VASPs

According to the proposed regulations, VASPs are required to conduct mandatory verification of every transaction over 1 million Pakistani rupees (approximately $3,533). Cryptocurrency services are required to collect and store complete information about the sender and recipient of assets, ensuring the transparency of fund movements.

Combating Illicit Financial Flows

To combat illicit financial flows, the Pakistani government believes it is necessary to introduce mandatory verification of VASP foreign partners and monitoring of unhosted wallets. This will reduce the risks associated with money laundering and terrorist financing.

Changes in VASP Governance

Any significant changes to VASP owner information will require prior regulatory approval. Companies are also required to publish comprehensive legal information on their official websites. Additionally, crypto companies will be required to deposit 30% of their capital with the State Bank of Pakistan.

Licensed VASPs are permitted to outsource certain operations to third-party service providers located abroad. This can help improve the efficiency of crypto services, but also requires strict oversight by regulators.

Cybersecurity and Audit

The government intends to require crypto companies to annually update their cybersecurity policies and regularly test and audit their IT systems. This is an important step to protect users and ensure the reliability of crypto platforms.

Bitcoin Strategic Reserve

In May, Pakistan announced the creation of a Bitcoin strategic reserve, inspired by a similar initiative in the United States. That same month, the Pakistani Ministry of Finance approved the creation of a dedicated agency to oversee blockchain and cryptocurrency, underscoring the government's growing interest in regulating and developing this sector.

In Conclusion

Tighter regulation of cryptocurrency services in Pakistan reflects the government's commitment to improving the security and transparency of the virtual asset market. These measures could promote wider adoption of cryptocurrencies and improve their reputation as a reliable financial instrument.