ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has not issued any approval / license to any cryptocurrency trading platform, as the commission does not regulate cryptocurrency / virtual currency or any platform. – trading form providing such services.
Senior SECP officials said Business recorder here on Tuesday that the SECP does not regulate cryptocurrency / virtual currency or any trading platform providing such services.
In accordance with the Circular of the State Bank of Pakistan (SBP), the SECP issued instructions in the Circular of August 27, 2020 dated April 6, 2018, in which the SECP requested all companies and limited liability companies to ensure compliance with the SBP circular.
Said circular prohibits transactions in virtual currencies. Responding to a question, officials added that it was again underlined that all currency related matters fall within the regulatory domain of the SBP and that no approval / license for any cryptocurrency trading platform is had been granted by SECP.
According to the SECP, the SECP may regulate digital / virtual assets, including security tokens, but it does not include any form of virtual currency / cryptocurrency or central bank digital currency. One of the main advantages of digital assets is the ability to split each asset.
Digital assets can be broken down into more affordable and transferable units that create an opportunity for greater liquidity and diversity of investors. Fractional ownership and trading of digital assets in secondary markets frees up liquidity in previously illiquid markets, creating whole new marketable assets – such as real estate tokens – and enabling a more standardized form of trading for currently illiquid assets. , such as corporate bonds.
In addition, the barriers to issuing an asset or security are drastically lowered, opening up greater opportunities for smaller issuers, while existing issuers benefit from new forms of securities. The digital asset landscape has matured significantly and momentum is now fueled by innovation in areas such as custody, settlement and post-trade – which remain core functions in regulated financial markets.
The SECP will continue to engage with market participants and welcome comments from industry to decide how to regulate the area of ââdigital assets. This area has the potential to deliver major improvements in efficiency and lower costs for end users by combining trading, settlement and custody services into a single seamless service offering.
The objective of the SECP regulatory framework is to support financial inclusion efforts and the advancement of technological innovation in a responsible and balanced manner; ensuring the security and efficiency of the capital market and its institutions; ensure the protection of consumers and investors; minimize regulatory arbitrage opportunities; fight against circumvention of exchange control rules and regulations; illicit financial flows, money laundering and terrorist financing.
SECP said there is a need to develop a policy and regulatory response to digital assets in Pakistan, driven by the following: (i) digital assets are a form of innovation that can impact the financial sector from the country ; (ii) Digital assets do not fit into the current regulatory framework; (iii) Digital assets can create conditions for regulatory arbitrage while presenting risks; and (iv) Increase interest, investment and participation in digital assets.
SECP also explained in detail two types of digital assets namely utility token and security token. One option would be to register Initial Exchange Operators (IEOs), who will perform due diligence to enable the public offering in the capital market by way of issuance of security tokens.
The likely process may be for an issuer to submit their request, including a white paper, to an IEO operator for approval. The IEO operator will then evaluate the issuer and the white paper and, if approved, facilitate the offering of the tokens to investors.
The SECP will work with the IEO operator to evaluate the IEO issuer. Once approved, the public can then invest in the IEO platform’s issuer tokens. This would require devising regulations to register IEOs as well as prescribing a criterion for functioning as such by the Commission. Therefore, IEOs can only be offered by registered operators who meet the suitability criteria.
Copyright Business Recorder, 2021