The cryptocurrency market has suffered a loss of over $1,000 billion since November 2021.
The value of cryptocurrencies declined last week and the trend continued Monday as well.
Premium digital currency Bitcoin’s value fell by of 6.84 per cent Monday. It is now valued at $33,541. In just four days, its value has reduced by $10,000.
It was valued at $43,000 last week.
The second biggest cryptocurrency Ethereum is now valued at $2,198 after a fall of over 12 per cent since Friday. Cardano has lost its value by 14 per cent, Solana by 19 per cent, Polkadot by 14 per cent, Dogecoin by 10 per cent and Shiba Inu by one per cent.
The cryptocurrency market was flourishing until November 2021 and one Bitcoin was valued at over $69,000. But since then all digital currencies have seen a dramatic fall in value.
Since November 2021, Bitcoin has lost 45 per cent of its value and more than $1,000 billion have vanished from the market.
Experts are predicting that cryptocurrencies will lose more value in near future.
One of the major reasons for plummeting cryptocurrencies’ value is the strict policies and regulations enforced in Pakistan, China, Russia, India and the United States of America.
According to reports, the US central bank’s strict monetary policy, amid rising inflation rate, has also impacted the cryptocurrency and stock markets.
Some investors have termed this recession “an opportunity for new people to invest in the market.” But small investors lost big due to this fall.
Pakistan to ban cryptocurrencies
On January 12, the State Bank of Pakistan (SBP) and the federal government decided to ban the use of all cryptocurrencies, according to a report submitted to the Sindh High Court (SHC).
For the first time, the central bank took a clear position on the cryptocurrencies and urged the SHC to not only ban cryptocurrencies but also impose penalties against crypto exchanges.
The status of cryptocurrencies in Pakistan has been in limbo in the absence of laws and rules to regulate the use of these digital currencies for trade.
On October 20, the Sindh High Court told the federal government to regulate cryptocurrencies within three months. The court directed the government to form a committee headed by the federal secretary of finance to determine the legal status of cryptocurrencies.
The court had instructed the authorities to come up with a report on the use of cryptocurrencies. The report was submitted to the Sindh High Court on Wednesday, January 12.
The report said that cryptocurrency is illegal and could not be used for trade
The report names at least eleven countries including China and Saudi Arabia that have banned cryptocurrencies.
The report also refers to the recent investigation by the FIA against crypto exchanges such as Binance and OctaFx and the risk these exchanges posed for the investors.
The Sindh High Court ordered that the report be sent to the finance and law ministries for a final decision on the legal status of the cryptocurrencies.
The law and finance ministries will determine if a ban against cryptocurrencies would be within the ambit of the Constitution. They would also work out a legal framework.
A two-member bench headed by Justice Karim Khan Agha heard the case.
SBP Deputy Governor Seema Kamil submitted the 38-page report recommending that cryptocurrencies be declared illegal.
The report says that cryptocurrency is a virtual business that could be used to finance acts of terrorism and to launder money.
An important question was raised during the hearing: What would be the status of cryptocurrencies in the intervening months before a final decision is made.
The court said that the Federal Investigation Agency (FIA) and other agencies would continue to act according to their rules.
It urged the court to ban the “unauthorized operations” of cryptocurrency exchanges and impose penalties against them “as some other countries have done.”
Petitioner Waqar Zaka pleaded with the court that cryptocurrencies be declared legal as a large number of Pakistanis were interested in them.
The court will next hear the case on April 12.
SBP takes a clear position
The report submitted to the Sindh High Court indicates a clear position taken by the central bank for the first time.
In April 2021, SBP Governor Raza Baqir had said the central bank is studying cryptocurrencies and their potential for bringing transactions happening off the books into a regulatory framework.
In an interview with CNN’s Julia Chatterley, he said, “We are studying that [Central Bank Digital Currency] very carefully.”
He said that it will not only boost the central bank’s efforts for financial inclusion but also allow it to make progress in its fight towards anti-money laundering and countering terrorism financing.
However, before this key statement, the central bank had prohibited the transactions in digital currencies and declared them ‘illegal tender’.
In a circular issued to banks in 2018, SBP warned the banks that virtual currencies like Bitcoins, Lite Coin, Pakcoin, etc. are not legal tender issued or guaranteed by the Government of Pakistan.
The circular also said the SBP has not allowed any individual or entity to issue, sell, purchase and exchange virtual currencies.
The central bank directed the banks to refrain from trading, holding and investing in such currencies, and to report any such transactions to the Financial Monitoring Unit of the central bank.
High stakes
Cryptocurrencies have attracted thousands of investors from Pakistan and they have reportedly invested $20 billion in digital currencies, according to Federation of Pakistan Chambers of Commerce and Industry President Nasir Hayat Magoon.
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