SECP publishes Position Paper on Regulation of Digital Assets/Security Tokens

November 11, 2020: The Securities and Exchange Commission of Pakistan (SECP) has published a position paper on regulating digital assets. The paper outlines the concepts applicable for a nascent digital finance industry in Pakistan, examines regulatory frameworks in place in other jurisdictions and potential approaches to regulating digital assets in Pakistan.

This position paper focuses exclusively on Asset-backed Security Tokens/Digital Assets and does not include any form of virtual/crypto currency or central bank digital currency.

One of the key advantages of digital assets is the ability to fractionalize each asset. Digital assets can be broken into more affordable and transferable units that create an opportunity for greater liquidity and investor diversity. Fractional ownership and trading of Digital Assets in secondary markets unlock liquidity in previously illiquid markets, creating entirely new tradable assets – such as real estate tokens – and enabling a more standardized form of trading for currently illiquid assets, such as corporate bonds.

Moreover, the barriers to issue an asset or security are significantly lowered opening up greater opportunity for smaller issuers while existing issuers benefit from new forms of securities.

The digital asset landscape has matured significantly, and momentum is now being fuelled by innovation in areas such as custody, settlement and post-trade – which remain critical functions in regulated financial markets.

The SECP will continue to engage with market participants and welcome industry feedback in deciding how to regulate the digital assets domain. This area has the potential to drive major improvements in efficiency and cost-reduction for the end-users by combining trading, settlement and custody services into one seamless service offering.

The position paper can be accessed at https://www.secp.gov.pk/document/position-paper-regulation-of-digital-asset-trading-platforms/?wpdmdl=40643 and comments/feedback/suggestions can be provided on feedback@secp.gov.pk

Press Release