Urdubit, Pakistan’s first bitcoin exchange, opened on October 11, 2014, and has been forced to close following an effective ban on all cryptocurrency trading by the country’s central bank, State Bank of Pakistan (SBP). The circular issued by the SBP, on April 6, 2018, which was sent out to all banks, payment system operators, and payment service providers, notified them that:
Virtual Currencies (VCs) like Bitcoin, Litecoin, Pakcoin, OneCoin, DashCoin, Pay Diamond etc. or Initial Coin Offerings (ICO) tokens are not legal tender, issued or guaranteed by the Government of Pakistan. SBP has not authorized or licensed any individual or entity for the issuance, sale, purchase, exchange or investment in any such Virtual Currencies/Coins/Tokens in Pakistan.
Furthermore, the cental bank advised the public that persons “using Virtual Currencies/ Coins/ Tokens for the purpose of transferring value outside Pakistan are subject to prosecution as per the applicable laws.”
Later that the same day, Urdubit notified its customers via Twitter that it was closing down:
We are closing urdubit. Please buy btc instantly as we are cancelling orders on order book or withdraw your PKR immediately.
— Urdubit (@urdubit) April 6, 2018
Two days later, it sent out a follow-up tweet, to warn its customers they needed to withdraw their fiat and bitcoin funds immediately as the cryptocurrency exchange would shut down at midnight. It warned that if they didn’t, the company would not be held liable for the funds. Recently, it announced via another tweet that all of its systems and its website have been shut down:
All systems have been shut down. NO WITHDRAWALS of any kind will be entertained. Website shut down hoo chuki hay abb koi withdrawals nahee hoon gay. PKR phelay closed they ajj btc withdrawals bhee close ker diya gain hain.
— Urdubit (@urdubit) April 13, 2018
The country’s other cryptocurrency exchanges, including the largest, BTCPK, have also been forced to shut down. BTCPK’s website is still up and shows the prices of various cryptocurrencies. A message on it reads: “These Prices are for Informative purpose Only. BTCPK follows prohibition rules as set by STATE BANK OF PAKISTAN via Circular No. 03 of 2018.”
It is worth noting that SBP’s mandate (on April 6) on cryptocurrency transactions came despite a lack of any dedicated legislation on cryptocurrencies. The financial institution may be following in the footsteps of India’s central bank, which recently issued a similar order . The Reserve Bank of India (RBI) had mandated, on April 5, that all banks and other financial entities under its jurisdiction were not allowed to “deal with or provide services to any individual or business entities dealing with or settling VCs”;
Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies,
including Bitcoins, regarding various risks associated in dealing with such virtual currencies.
In view of the associated risks, it has been decided that, with immediate effect, entities
regulated by RBI shall not deal with or provide services to any individual or business entities
dealing with or settling VCs. Regulated entities which already provide such services shall exit
the relationship within a specified time.
While Pakistan’s move seemingly forced the country’s cryptocurrency exchanges to shut down, India’s approach may have been more reasonable. The RBI gave banks a three-month period to cease all crypto-related financial services, which may give cryptocurrency exchanges in the country a chance.
