Cryptocurrencies Outside FBR’s Tax Net: FTO

In a recent statement, the Federal Tax Ombudsman (FTO) revealed that cryptocurrencies remain outside the Federal Board of Revenue (FBR)’s tax net in Pakistan. This revelation exposes major regulatory blind spots in the country’s digital finance landscape.

Regulatory Gaps in Crypto Oversight

The FTO’s report highlighted serious deficiencies in how Pakistan tracks and taxes digital assets such as Bitcoin, Ethereum, and other cryptocurrencies. The investigation examined the roles of the State Bank of Pakistan (SBP) and FBR in controlling crypto-related activities — and found that no effective mechanism exists to identify, regulate, or tax investors in digital currencies.

Why It Matters

This isn’t just another financial headline — it has far-reaching implications for:

• Tax collection and revenue generation
  

• Illegal fund transfers and money laundering
  

• Investor protection and regulation
  

• International compliance standards
  

The absence of crypto taxation has created a massive loophole, allowing traders to earn and move millions without ever appearing on the tax radar.

The FTO estimated that billions of rupees worth of crypto trading occur annually in Pakistan through:

• Binance
  

• LocalBitcoins
  

• P2P networks
  

• Private wallets
  

FBR’s Limited Role

Despite being Pakistan’s primary tax authority, responsible for collecting income tax, sales tax, and customs duties, the FBR remains largely blindfolded in the crypto sector. It lacks:

• Systems to track digital wallets or exchanges
  

• Reporting obligations for users or platforms
  

• Integration with global crypto compliance networks
  

Rising Financial Risks

According to the FTO, this regulatory vacuum could enable:

• Money laundering
  

• Terror financing
  

• Illegal cross-border transfers
  

• Hawala/hundi-style operations
  

Because crypto transactions are anonymous and decentralized, they’re hard to trace without specialized technical tools and expertise.

FTO’s Recommendations for Pakistan

To address these growing risks, the FTO proposed several key measures:

1. Create a Comprehensive Crypto Tax Framework

• Define how crypto assets should be taxed — whether as capital gains or business income
  

• Make wallet registration mandatory
  

• Track and report trading activity
  

2. Train FBR Officers in Digital Forensics

• Equip officers with tools and knowledge to trace blockchain transactions
  

• Use analytics platforms to monitor suspicious trades
  

3. Integrate with Global Crypto Platforms

• Partner with international exchanges to obtain user data
  

• Introduce reporting obligations similar to Form 8949 (U.S. model)
  

4. Establish a Dedicated Regulatory Body

• Form a separate department under SECP or SBP
  

• License crypto exchanges and monitor compliance
  

The Road Ahead

The FTO’s report serves as a wake-up call for policymakers. As Pakistan’s crypto market continues to grow, remaining unregulated and untaxed is no longer sustainable.

To safeguard national interests and boost digital revenue, the government must:

• Recognize crypto as a legitimate digital asset
  

• Implement clear regulatory policies
  

• Ensure fair taxation and investor protection
  

Such steps would bring transparency, accountability, and trust to Pakistan’s digital economy — while ensuring the state doesn’t miss out on billions in untapped revenue.