FATF Clarification on Crypto Regulations: Unpacking Pakistan’s Ban and Global Implications

FATF crypto clarification, Pakistan ban, global implications, twilight city skyline, balanced scale and cryptocurrency coins, tension-filled atmosphere, vibrant contrasting colors, prevailing clouds over a modern urban landscape, expressive brush strokes, chiaroscuro light effects, mood of uncertainty and potential opportunities.

The Financial Action Task Force (FATF) has clarified in an email statement to CoinDesk that it does not require its member countries to issue a blanket ban on virtual assets and virtual asset service providers. This comes after recent reports surfaced, claiming that the global money laundering watchdog had set such a condition for Pakistan, a South Asian nation currently on FATF’s “grey list.”

The list targets countries that need to address strategic deficiencies in their efforts to counter money laundering and terrorist financing. Amidst this backdrop, Pakistan’s Minister of State for Finance and Revenue, Aisha Ghaus Pasha, reportedly announced that cryptocurrencies will “never be legalized” in the country. Her statement was seen as a wholesale ban on cryptocurrencies by the government, even as Pakistan’s economy faces turbulence, partly due to its volatile political landscape.

The FATF, however, stressed that it only requires countries to understand and mitigate the money laundering and terrorist financing risks associated with the crypto sector. It calls for nations to issue licenses or registrations for crypto exchanges and supervise them the same way they do other financial institutions.

Furthermore, the FATF mandates that virtual asset service providers implement similar preventive measures as traditional financial institutions. This includes conducting customer due diligence, maintaining records, reporting suspicious transactions, and adhering to the organization’s travel rule, which obliges crypto service providers to collect and share information on transactions above a specified threshold.

While the FATF declined to directly address Pasha’s statements, it emphasized that “countries are permitted, but not required, to prohibit virtual assets and virtual asset service providers.”

This conflicting stance on how to approach the cryptocurrency industry highlights the struggle that many nations face in finding a regulatory sweet spot. While countries like Pakistan opt for perceived safety in adopting a blanket prohibition on digital assets, it is essential to consider the potential missed economic opportunities as well as the growth of unregulated markets. Nonetheless, the FATF’s public statement emphasizing countries’ prerogative to decide on cryptocurrency policies, will continue to shape the global conversation about the regulation and future of digital assets.

CoinDesk has reached out to the offices of Pakistan’s finance ministry and the Ministry of Foreign Affairs for comment.

Source: Coindesk

Sponsored ad