Consultation process on ‘Digital Assets’ begins

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has decided to formulate laws related to establishment of Digital Assets in the country and defining the status of cyber currency.

The first briefing in this regard was held here Monday in the SECP head office. The meeting was led by Additional Director, Primary Market Approvals, Securities Market Division Najia Ubaid and Director, Information System and Technology Abdul Rahim.

The SECP noted that there was a need to develop a policy and regulatory response to Digital Assets in Pakistan due to the need for innovation that may impact the financial sector of the country but challenge is that digital assets do not fit within the current regulatory framework.

While cyber currency including Bitcoin has been recognised in many advanced economies, the State Bank as well as the SECP has already prohibited crypto/virtual currency in Pakistan.

Since the digital/crypto currencies does not fall under SECP’s ambit, therefore the position paper does not deal with this issue. However, the SECP has started consultations to devise policy and regulations regarding issuance of digital tokens /assets and utility tokens.

The consultations process will he held with the stake holders, concerned citizens, experts and the concept paper over digital assets has been shared with the State Bank.

Mr Rahim said that the SECP targets to devise policy regarding digital assets, which are established under the widely used term “blockchain Open ledger” which is a platform that any client can access but cannot tamper.

“The benefits of blockchain, are that is saves transaction time from days to near instantaneous, removes cost overheads and cost intermediaries, it reduces risk of tampering, fraud and cybercrime,” he added.

However, he added that Bitcoin too was a product of the blockchain platform, but it was a crypto currency that was currently banned in the country.

Meanwhile the authorities in the country were focused in regularising ‘Security Tokens’ that are either backed by real assets or cryptographic assets.

The SECP position papers have defined that the “Digital Assets” can be classified as Asset backed Digital Assets/Token.

Ms Ubaid highlighted that initial public offering (IPO) process. “IPOs are backed by investment banks that list the shares on the stock exchange, allowing you to buy, sell and trade, whereas the SECP envisages that an initial coin offering (ICO) is offered as a crypto currency rather than as a stock, and other such product was the Security Tokens (STO),” she explained.