The Securities and Exchange Commission of Pakistan (SECP) has initiated work to formulate regulations for the use of digital and crypto assets in Pakistan. The Commission in it’s paper suggested several options for trading of digital assets; which include launching a new exchange specifically for crypto currencies or utilising the existing Pakistan Stock Exchange (PSX).
The regulatory body has prepared a paper to seek input from the financial sector, as well as other stakeholders, and has cited rules and regulations formulated in Malaysia, Hong Kong and USA in the document.
“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,” the SECP stated in its document
The Commission asks stakeholders what assets can be classified as the digital or crypto assets. The paper suggested two options; one is digital assets backed by asset or a distributed ledger technology. The digital assets will be described as token. The Commission suggested that token system would be two phased. One would be called primary token and second will be called secondary token option.
“An option would be registering the Initial Exchange Operators (IEOs) who shall perform the due diligence to allow public offering through capital market by mode of issuing security tokens,” the Commission’s paper suggested.
Describing the process, the commission stated that “an issuer to submit its application including a white paper to an IEO operator for approval. The IEO operator will then assess the issuer and white paper, and if approved, facilitate the offering of the tokens to investors.
“The SECP will be working with the IEO operator in assessing the IEO issuer. Once approved, the public may then invest in the issuer’s tokens from the IEO platform.
However, this would require designing regulations to register IEOs as well as prescribing a criterion to operate in this role by the Commission, the report stated.
For secondary trading, the commission’s paper suggested another option. “An option would be to allow IEOs for secondary trading as Decentralized Exchange Platforms, i.e performing the services of trading settlement and custodian. The second option could be separately registered Digital Assets Trading (DAT) operators who shall be providing the services of trading settlement and custodian services.”
“Third option could be allowing secondary trading through Pakistan Stock Exchange and traditional mechanism of settlement and custody be followed,” the report said.
The commission said all major regulators worldwide are working on regulations to end uncertainty revolving around digital assets. “Objectives of the regulatory framework will be supporting financial inclusion efforts and the advancement of technological innovation in a responsible and balanced manner,” SECP stated in it’s document.
With this paper, Pakistan has joined the world regulators of all the major markets who are working to formulate and enforce regulations for the crypto or digital currencies. Many central banks have already started work on their digital currencies, the Chinese central bank has entered in the phase of testing its own digital currency.