The establishment of a regulatory framework for cryptocurrencies in Pakistan necessitates a structured and phased approach.

The first article of this series explored the initial step of defining cryptocurrencies and conducting a legal and regulatory review, which has set the stage for the next critical phase, establishing an oversight body and implementing a licensing system.

The success of crypto regulations depends on a well-functioning oversight authority that upholds compliance while promoting innovation.

The licensing framework is equally important, as it allows legal recognition to crypto businesses while safeguarding consumer interests, maintaining financial stability, and ensuring alignment with international standards.

The creation of an oversight body tailored to Pakistan’s unique financial and technological environment is essential.

The best model for Pakistan would be an independent authority under the Ministry of Finance, tentatively named the Pakistan Digital Assets Regulatory Authority (PDARA). Countries like the United States, the European Union, and Switzerland have established multiple agencies overseeing different aspects of crypto regulation, which often leads to complexity and fragmentation.

Pakistan should avoid such a model and instead develop a centralized oversight body that consolidates functions such as licensing, compliance monitoring, policy development, and enforcement under a single entity. This approach will not only reduce regulatory challenges but also streamline business operations for crypto entrepreneurs.

The PDARA should act as the primary licensing authority for virtual asset service providers (VASPs), ensuring compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) regulations. This model aligns with best practices in jurisdictions like Singapore and Estonia, where centralized oversight has proven to be effective in balancing innovation with security.

The authority should collaborate with the State Bank of Pakistan (SBP) for matters related to fiat currency conversion, the Financial Monitoring Unit (FMU) for AML compliance, and the Federal Investigation Agency (FIA) for enforcement against illicit activities.

The licensing model should be designed for accessibility and efficiency, ensuring that businesses can enter the market without........

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