Taking a cue of development s happening in the new technologies, Pakistan has released its paper on regulations on digital asset in the country.
The paper issued by the Securities and Exchange Commission of Pakistan (SECP) recently outlined some of the regulatory measures that will be imposed upon the digital assets market in Pakistan at the initiation of a ‘new era of digital finance’.
The paper said, “Digital assets also known as virtual assets and crypto assets are the start of a new era of digital finance, and demand innovative regulatory measures and approaches by the regulators across the world. This could only be possible by initiation of a new era that re-invents regulatory regime/measures as they are known to the regulators globally today.”
On security tokens, SECP said, “It 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. While ensuring that investors and markets are protected, SECP aims to encourage innovative and beneficial ways to raise capital.”
SECP also recognizes that it is important to have regulatory measures in place for the virtual assets market, evaluates the frameworks applied by regulators towards digital assets in various countries across the globe that includes the US and Hong Kong, and discusses the adoption of digital assets in Pakistan and regimes for the operation and regulation of the new crypto currencies market.
SECP also invited proposals for defining the way forward with the design and development of a sturdy regulatory directive for virtual currencies at par with the rest of the world.
The paper has also offered few options on how decentralised exchange can operate in the country.
For the primary token offering, the paper suggests enlisting Initial Exchange Operators (IEOs), who would perform the due diligence to allow public offering through the capital market, by issuing security tokens. An issuer would first need to submit an application with a white paper to an IEO and seek approval. If the IEO and SECP approve, the offering of tokens to the general public can take place.
Options for IEO
The position paper points out that a new set of rules has to be designed for this whole procedure of registering IEOs, and an IEO would have to meet the eligibility criteria to be enlisted.
As for secondary trading, the paper talks of three options they can consider: allowing IEOs to operate as DEX (decentralized exchange) platforms, separately registering DAT (digital assets trading) operators to provide trade settlement and custodian services, or facilitating secondary trading through the Pakistan Stock Exchange itself, with the traditional mechanism of settlement and custody.
Emphasising on the main objective of the regulatory framework, SECP said that it want to support financial inclusion efforts and the advancement of technological innovation in a responsible and balanced manner, while ensure the safety and efficiency of capital market and its institutions along with consumer and investor protection.
The exchange wants to minimise opportunities for regulatory arbitrage and combat the circumvention of exchange control rules and regulations; illicit financial flows, money laundering and the financing of terrorism.