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SECP decides to formulate digital assets law

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has decided to formulate laws related to the establishment of digital assets in the country.

This was revealed by SECP Information System & Technology Director Abdul Rahim and Primary Market Approvals & Securities Market Division Additional Director Najia Ubaid during a media briefing on digital assets.

Abdul Rahim said that the SECP would devise a policy regarding digital assets that are established under the widely used term ‘blockchain open ledger’.

“Blockchain saves transaction time from days to near instantaneous, removes cost overheads and cost intermediaries and reduces the risk of tampering, fraud and cyber crime,” he added.

He informed that bitcoin too was one of the products of the blockchain platform, but it was a cryptocurrency that was currently banned in the country.

It may be noted that the recently published SECP position papers defined virtual asset as a “digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes”.

Meanwhile, Najia Ubaid, said SECP envisages offering an “initial coin offering (ICO)” as a cryptocurrency rather than as a stock, adding that other such product was Security Tokens (STO).

“However, ICOs are not regulated and therefore carry much more risk; ICO investment was an idea rather than a business that was already generating revenue.”

She shared that the SECP has suggested [the government] that regulated STOs be launched in the country.

There are four layers of STOs under the blockchain protocols, starting from issuing an STO, followed by contractual bindings and ending at STO exchanges, which is its secondary trading forum.

The SECP officials shared that security token/digital assets/crypto assets are being regulated in various countries including Hong Kong, USA, Malaysia, Japan, Thailand, Israel, Canada, Singapore and Abu Dhabi.

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

Abdul Rahim said that cyber currency including bitcoin has been recognised in many advanced economies, but the state bank as well as the SECP had prohibited crypto/virtual currency in Pakistan.

“SECP intends to study and evaluate the effects of the distributed ledger, digital assets and other innovative technologies and encourages market participants to get engaged with the regulator,” he concluded.

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