Dr. Ikramul Haq & Abdul Rauf Shakoori
The issuance of No Objection Certificates [NOC] by Pakistan to two major global virtual asset exchanges represents a meaningful policy inflection point that warrants both acknowledgment and rigorous evaluation. The decision signals a commitment by the state to move beyond informal engagement with digital assets toward a regulated integration with the global crypto economy.
The move aligns Pakistan, at least symbolically, with a broader international shift where jurisdictions are replacing ambiguity with formal licensing, supervisory oversight, and enforceable compliance standards. The United Arab Emirates, Japan, and multiple European Union member states have already adopted structured regulatory regimes that subject crypto exchanges to prudential, conduct, and anti-financial crime obligations comparable to those imposed on traditional financial institutions.
The recognition of this global trend does not, however, eliminate the need for jurisdiction specific risk assessment focused on Pakistan’s macroeconomic conditions, institutional capacity, and international obligations. The issuance of NOCs does not constitute a full licensing framework and cannot substitute for statutory clarity, supervisory powers, or enforcement mechanisms.
The Financial Action Task Force guidance requires that engagement with Virtual Asset Service Providers (VASP) be risk based, proportionate, and fully integrated into national anti-money laundering and combating financing of terrorist regimes. The absence of a comprehensive virtual asset law means that regulatory discretion, rather than legislative mandate, currently emphasizes Pakistan’s approach.
The early approvals granted to Binance and HTX, as reported by the media, allow both exchanges to register with Pakistan’s Anti-Money Laundering (AML) framework, establish local operational units, and prepare full applications for regulatory authorization. The approvals were reportedly issued after a review of governance and compliance controls by the relevant regulatory authority, indicating an initial supervisory assessment rather than final clearance.
The framework mirrors sandbox style approaches adopted in some jurisdictions but remains incomplete without published criteria, timelines, and enforceable conditions. The lack of publicly disclosed approval documents limits independent assessment of the depth and rigor of the compliance review undertaken.
The evaluation of Binance’s and HTX’s global compliance histories is fundamental to any credible policy analysis. The record shows that Binance has faced enforcement actions and monetary penalties in multiple jurisdictions for deficiencies related to customer due diligence, transaction monitoring, sanctions compliance, and reporting obligations.
The record also reflects that HTX, previously operating under the Huobi brand, has faced regulatory scrutiny and operational restrictions concerning licensing status, governance arrangements, and AML controls in several markets. The FATF guidance explicitly requires enhanced due diligence where VASPs have demonstrated prior compliance failures or operate across high risk jurisdictions.
The decision to allow market entry by exchanges with documented regulatory issues elsewhere heightens the importance of domestic supervisory controls. The requirement under FATF Recommendation 15 mandates that jurisdictions ensure VASPs are subject to effective systems for monitoring, inspection, and sanctions.
The absence of publicly articulated enhanced supervision measures raises concerns regarding the strength of Pakistan’s risk mitigation strategy. The reliance on early approvals without full legislative backing exposes regulators to reputational and systemic risk, which leads to compliance failures.
The concept of tokenization, frequently cited as the primary economic benefit of crypto engagement, requires precise legal and technical definition. The process of tokenization involves representing ownership or economic rights in real world assets through cryptographic tokens recorded on distributed ledger systems. The process typically includes asset identification, legal structuring, valuation, issuance, custody arrangements, and regulated secondary market trading. The legal enforceability of tokenized assets depends on alignment with existing property, securities, and contract law frameworks.
The purported benefits of tokenization include improved liquidity, fractional ownership, enhanced auditability, and reduced settlement risk. The relevance of tokenization to reserve management arises from the potential to track asset backed instruments transparently and in real time.
The guidance issued by the International Monetary Fund and the Bank for International Settlements warns that tokenized public or quasi public assets must not undermine sovereign balance sheets or create hidden fiscal liabilities. The tokenization of state linked assets without explicit statutory controls risks blurring the boundary between prudent fiscal management and speculative financing.
The international experience with state asset tokenization exhibits that success depends on institutional strength rather than technological innovation. The jurisdictions most advanced in this area, including Switzerland and Singapore, have embedded tokenization within existing securities and public finance laws.
The approach in these jurisdictions prioritizes investor protection, disclosure standards, and enforceable governance structures over rapid capital inflows. The involvement of regulated financial institutions rather than lightly supervised platforms remains a defining feature of credible tokenization initiatives.
The purpose of tokenizing state assets globally has been to enhance transparency, operational efficiency, and market accessibility rather than bypass democratic oversight. The process does not replace parliamentary approval, public procurement rules, or sovereign debt management frameworks. The FATF guidance highlights that tokenization must not be used to obscure beneficial ownership, funding sources, or risk exposure. The absence of these measures can expose states to money laundering, sanctions circumvention, and fiscal misreporting.
The transparency of commitments signed with crypto exchanges constitutes a core governance concern. The best international practice involves public consultation, regulatory impact assessments, and disclosure of contractual terms and supervisory conditions. The examples of Switzerland and Singapore explain how policy papers, licensing criteria, and supervisory expectations are made publicly accessible. The immediate signing of commitments in Pakistan without disclosure of terms raises legitimate questions regarding procedural integrity and institutional accountability.
The secrecy surrounding such agreements undermines public trust and weakens institutional credibility. The constitutional principles governing public finance and regulatory authority require openness, traceability, and proportionality in decision making. The absence of published memoranda or regulatory orders prevents independent verification of compliance with domestic law. The lack of transparency also complicates parliamentary oversight and judicial review.
The broader regulatory flaws in Pakistan’s financial architecture amplify these concerns. The absence of a unified virtual asset statute has resulted in fragmented oversight among financial regulators. The lack of clear rules on custody, capital adequacy, consumer protection, and dispute resolution increases systemic risk exposure, creates regulatory arbitrage opportunities, and discourages responsible market participants.
The impact of regulatory gaps extends beyond the crypto sector into a wider financial system. The correspondent banking relationships critical to Pakistan’s trade and remittance flows depend on international confidence in Anti Money Laundering and Countering Financing of Terrorism (AML-CFT) controls.
The FATF framework explicitly links weak supervision of VASPs to elevated country risk assessments. The reputational damage arising from regulatory failure can translate into higher borrowing costs and limit the access to global finance.
The Web3 paradigm, emphasizing permissionless access, unrestricted capital flows, and minimal oversight, poses significant challenges for Pakistan’s policy framework, given persistent balance of payments and budgetary pressures, and foreign exchange shortfalls, where removal of regulatory oversight could worsen capital flight and financial instability. Whereas tokenizing the stock market theoretically broadens investor access through fractional ownership and digital settlement, empirical evidence underlines that success requires strong corporate governance, enforceable investor rights, and credible dispute resolution, without which tokenized equities risk becoming speculative instruments detached from productive investment.
The experience of El Salvador provides a cautionary comparison for Pakistan. The adoption of Bitcoin as legal tender was intended to attract foreign investment and reduce dependence on traditional financial intermediaries. The policy failed to deliver sustained capital inflows or macroeconomic stability. The subsequent engagement with the International Monetary Fund resulted in the removal of legal tender status and reinforced the limits of crypto first strategies in fragile economies.
The Global evidence highlights the misuse of blockchain for fraud, ransomware, terrorist financing, and sanctions circumvention, with annual illicit activity estimated in the tens of billions of dollars, implementing the FATF mandate that regulation, supervision, and enforcement are critical to ensure consumer protection and counter frauds. Pakistan’s policy choices should be directed through binding frameworks, including FATF Recommendation 15 and its Interpretive Note, IMF guidance linking crypto to macro-financial stability and capital flow management, and Basel Committee principles on prudential treatment of crypto exposures for regulated institutions.
The right way forward for Pakistan requires a phased approach that must be driven by law and supported by strong institutions. Comprehensive virtual asset legislation should come first. Only after this state should allow large-scale market entry by foreign exchanges. Such entry must be supported by a dedicated licensing, supervision, and enforcement regime. This is essential to ensure credibility.
Crypto policy must also be aligned with capital controls. It must remain consistent with reserve management and fiscal discipline. These priorities are non-negotiable. Sustainable investment depends on regulatory credibility and transparency. It also requires strong institutional capacity. Adherence to international standards is critical. Disciplined implementation of global best practices is the only viable path. This is necessary to leverage digital asset innovation safely. It is also essential to avoid undermining financial stability.
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Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, environment, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He holds LLD in tax laws with specialization in transfer pricing. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996.
He established Huzaima & Ikram in 1996 and is presently its chief partner. He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA).
He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include, Tax Reforms in Pakistan: Historic & Critical Review, Towards Broad, Flat, Low-rate, and Predictable Taxes (third edition, 2024), Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal).
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 3000 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
X (formerly Twitter): DrIkramulHaq
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross-border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to ensure knowledge transfer.
His notable publications are Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
X (formerly Twitter): Abdul Rauf Shakoori
The recent publication, coauthored by these writes with Huzaima Bukhari is:
Pakistan Tackling FATF: Challenges & Solutions, available at:
https://aacp.com.pk/book-detail/pakistan-tackling-fatf-challenges-and-solutions-35
https://www.amazon.com/dp/B08RXH8W46