A couple of days ago, a news article came out, that cited: FBR goes after Bitcoin traders. The article highlights that money-laundering or the flight of capital is the main threat to this pursuit (which by the way has not been confirmed as of yet).
I wanted to explore the basis under which these raids are being conducted and wanted to comment on this further. I am not a lawyer, and these are my own personal views. Please seek professional legal advice from bona fide lawyers and not ambulance chasers!
As of the writing of this article, 29th of May, 2017, I’ve searched through the following websites, trying to find any circular &/or notification, gazette, SRO, press release, etc. related to Bitcoin &/or Cryptocurrency – but I could not find it. The only official notice (warning) I found was on SECP’s website (see below).
I also searched through the following to find any reference to the word Bitcoin or Crypto-Currency and could not find any reference either.
- Pakistan Penal Code, 1860;
- Prevention of Corruption Act, 1947;
- Foreign Exchange Regulations Act, 1947;
- Customs Act, 1969;
- Securities Act, 2015;
- Sales Tax Act, 1990;
- Federal Excise Act, 2005; and
- Income Tax Ordinance, 2001.
In addition to this, with the help of Google I searched through the following websites (most of these websites have a search mechanism that simply cannot be trusted):
- State Bank of Pakistan (SBP)
- Federal Board of Revenue (FBR) (search was not working so used Google/Bing)
- Securities & Exchange Commission of Pakistan (SECP)
- Financial Monitoring Unit (FMU)
- Pakistan Remittance Initiative (PRI)
I even searched through The Companies Act 2017 [PDF document], passed by Majlis-e-Shoora – our National Assembly on 24h May 2017. Even that did not have a single reference to bitcoin &/or cryptocurrency.
Financial Monitoring Unit (FMU’s) Website has zero references to Bitcoin.
Pakistan Remittance Initiative (PRI) Website has zero references to Bitcoin.
Securities & Exchange Commission of Pakistan (SECP) Website has zero references to Bitcoin (other than the notice which I have already placed above).
Federal Board of Revenue (FBR) Website has zero references to Bitcoin.
State Bank of Pakistan (SBP) Website has zero references to Bitcoin.
From the Dawn article, it cites:
Tax evasion is a predicate offense under Anti-Money Laundering Act 2010. The government has appointed the Directorate General of I&I-IR as investigating and prosecuting agency in cases where tax-evaded money is laundered.
For bitcoin to be considered for money-laundering, it has to be defined into an asset class whereby Bitcoin has been declared as “money” or some form of an asset as per “some” legal definition in some law in Pakistan.
Right now, the Government of Pakistan in no way recognizes Bitcoin as legal tender or legal “anything”. It has no legal standing under any law in Pakistan.
To charge someone for money laundering using bitcoin or to go after Bitcoin traders for purposes of aiding/abetting money laundering or flight of capital, is like saying, a person goes into the market and buys monopoly money and then takes this monopoly money abroad. It is ridiculous and a helpless move by the government.
I am no fan of the government on many occasions, but I am also no fan of people who willfully or unwillingly violate the law.
However, having said that, in the absence of the law, a witch hunt should be avoided. The government will only reap what it sows. If they did not make a conscious decision to regulate bitcoin and classify as an asset class, such as money, then I do not see any legal basis on how something that is NOT defined by law is being pursued as such.
FBR certainly has much larger issues at hand. Total Bitcoin-related volume from Pakistan is negligible. Peanuts! Out of that volume, only a small percentage could be used for purposes of money transfer (flight of capital) – and to where? To other countries which are perhaps much more strict than us on the source of income?
In simple English, if there is a law that says you cannot bounce a basketball indoors, that’s cool! You bounce a basketball indoors and you are breaking the law. However, if you bounce a tennis ball indoors, you’re okay. Because the law never defines something known as a tennis ball and hence, you cannot be breaking a law that does not exist.
This is my argument on this subject. Would be open to hearing what others have to say.