Pakistan Sets $100,000 Limit on Digital Currency Transfers as SBP Prepares Rupee-Backed Digital Currency
Pakistan’s State Bank has announced that the $100,000 annual transfer cap under FERA will apply to digital currencies. The SBP is also preparing to launch a rupee-backed digital currency after the PVARA Bill is passed.
Introduction: Pakistan’s New Chapter in Digital Currency Regulation
The global surge in cryptocurrencies has pushed countries to rethink financial regulations, and Pakistan is no exception. On Wednesday, the State Bank of Pakistan (SBP) announced that the restrictions under the Foreign Exchange Regulation Act (FERA) will extend to digital assets as well. This includes the maximum outbound transfer limit of $100,000 per year per individual.
While this move highlights Pakistan’s effort to regulate the fast-growing digital currency sector, it also raises questions about enforceability, transparency, and economic implications. At the same time, the SBP is preparing to launch its own rupee-backed digital currency, aiming to strengthen financial control while keeping pace with global fintech innovations.
SBP Extends FERA to Digital Assets
During a briefing before the Senate Standing Committee on Finance, SBP Acting Deputy Governor Dr. Inayat Hussain confirmed that FERA provisions will apply to digital currency transactions. This includes the same foreign transfer limits already imposed on traditional currency transfers.
“The law’s limits will apply, including the maximum outbound transfer of $100,000 by an individual in a year,” Dr. Hussain stated.
This marks a turning point in Pakistan’s financial policy, as the government seeks to bring cryptocurrency and digital assets into the formal economy.
The Role of the PVARA Bill in Digital Currency Regulation
The implementation of these changes depends heavily on the Pakistan Virtual Assets Regulatory Authority (PVARA) Bill, which is still under discussion.
- The PVARA Ordinance has already been issued by the government.
- Parliament must now pass the bill to provide permanent legal cover for regulating digital assets.
- The bill is also tied to amendments in the State Bank of Pakistan Act, making way for the introduction of a digital rupee.
Senator Saleem Mandviwalla, who heads the finance committee, confirmed that clause-by-clause discussions have begun, signaling progress toward a legal framework for Pakistan’s digital asset sector.
Implementation Challenges: Can FERA Apply to Cryptocurrencies?
One of the most debated issues is whether FERA can effectively regulate digital currencies.
Expert Opinions
- Shehroz Bakhtiyar, legal consultant to the Law Division, argued that the act needs amendments because it “cannot be implemented on digital assets in its present form.”
- Lawmakers, including Senator Afnanullah Khan (PML-N), stressed the difficulty of monitoring decentralized cryptocurrency transactions.
Enforcement Concerns
- Even though license holders will be legally bound to enforce the $100,000 annual transfer limit, enforcement remains questionable.
- Due to the decentralized and cross-border nature of cryptocurrencies, monitoring and controlling outbound digital transfers could prove nearly impossible.
Pakistanis Hold $21 Billion in Digital Assets
Senator Afnanullah Khan revealed that Pakistanis have invested over $21 billion in cryptocurrencies and digital assets. This number underscores the massive scale of local crypto adoption, making it urgent for the government to provide a legal and regulatory framework.
Without regulations, billions in investments could remain outside the formal economy, limiting tax revenues and increasing risks of money laundering or fraud.
The Planned Rupee-Backed Digital Currency
The State Bank of Pakistan is preparing to launch its own digital rupee, which will function as a legal tender backed by the Pakistani rupee.
Key Features of SBP’s Digital Rupee:
- Equal Value to Rupee: One digital rupee will equal one physical rupee.
- Bank Integration: Bank account holders will be able to manage both rupees and digital rupees in the same account.
- Dual Withdrawal Option: Customers can choose to withdraw cash in rupees or digital rupees.
- Support for Digital Assets: The new digital currency can be used for buying and trading digital assets within the regulatory framework.
This step reflects the SBP’s intention to modernize Pakistan’s financial system while minimizing risks associated with private cryptocurrencies.
International Commitments and Compliance
Pakistan’s digital asset framework is also influenced by global financial standards. According to Law Secretary Raja Naeem Akbar, digital assets will be regulated under:
- FERA (Foreign Exchange Regulation Act)
- FATF (Financial Action Task Force) recommendations
- Anti-Money Laundering (AML) Act
To ensure compliance, international cryptocurrency exchanges such as Binance will be required to set up offices in Pakistan and follow local laws. This will help Pakistan align with global standards and prevent its financial system from being exploited for illegal purposes.
Addressing Concerns Over the PVARA Bill
Critics have suggested that the PVARA Bill may have been modeled on foreign legislation. However, officials, including Raja Naeem Akbar, clarified that the bill was developed locally and through consultations with stakeholders such as the Pakistan Crypto Council.
This is crucial to ensure that the bill reflects Pakistan’s unique financial landscape rather than imposing unsuitable foreign practices.
Economic and Social Implications of Digital Currency Regulation
The new regulatory framework could have far-reaching impacts on Pakistan’s economy and society.
Positive Impacts:
- Financial Transparency: Regulating digital assets will help reduce illegal transactions.
- Boost in Investor Confidence: A clear framework may encourage more investment in crypto and blockchain technology.
- Global Integration: Aligning with FATF and AML standards will strengthen Pakistan’s standing in international finance.
Challenges:
- Enforcement Issues: Monitoring decentralized crypto transactions will remain a challenge.
- Regulatory Gaps: Amendments to FERA and other laws will be necessary.
- Market Resistance: Some investors may resist stricter regulations, preferring informal trading channels.
The Road Ahead for Pakistan’s Digital Economy
Pakistan’s journey toward digital currency regulation is still in its early stages. While the SBP’s digital rupee initiative shows commitment to innovation, much depends on how effectively the PVARA Bill and related laws are implemented.
If done correctly, Pakistan could position itself as a regional leader in digital financial systems, balancing innovation with regulation. However, without effective enforcement mechanisms, the risks of capital flight and illegal financial activities remain high.
Conclusion
Pakistan is at a crossroads in its financial history. By applying FERA rules to digital assets and introducing the PVARA Bill, the government is taking bold steps toward regulating a sector worth billions of dollars.
The upcoming rupee-backed digital currency by the State Bank of Pakistan could reshape how citizens trade and hold assets, ensuring both compliance and innovation. But for this vision to succeed, Pakistan must overcome regulatory loopholes, enforce financial limits effectively, and gain the trust of its people and international partners.
