Regulating Cryptocurrencies to Combat Terrorism-Financing and Money Laundering

Abstract

The emergence of cryptocurrencies has opened a new avenue for terrorist outfits and crime sydnicates to carry out their illegitimate monetary transactions. The ever-increasing use of cyrptocurrencies for terror financing, drug dealings, human trafficking and corruption has forced lawmakers around the world to undertake action to regulate the sale, purchase and exchange mechanisms of cryptocurrencies. While some countries like China have imposed an outright ban on cryptocurrencies, several other countries have embraced the potentials of cryptocurrency through mainstreaming and applying reasonable regulations. Amidst international efforts to regulate and harness the potential of cryptocurrency, Pakistan has imposed a ban on virtual assets and tokens. The rationale behind banning cryptocurrency is the number of challenges that the country will have to encounter in the form of tax evasion, transnational crimes, terrorism financing, cybercrimes, corruption, and kidnapping for ransom. While the current approach of Pakistan is very much in line with China, Pakistani policymakers need to take a hybrid approach of regulation for its economic and regulatory environment. Caution is necessary instead of taking a hasty decision and pursuance of long term planning for facilitating the introduction of cryptocurrencies in the country.