INDUS PACIFIC LAW OFFICE OF HAMAD ALI.

Crypto Currency Crimes U.S.-PAK

Is Cryptocurrency Legal Tender? U.S. and Pakistan Laws on Crypto as a Commodity

Cryptocurrency continues to disrupt global financial systems, but its legal classification remains complex and evolving. A common question we hear is: “Is cryptocurrency legal tender?” The answer is no—in both the United States and Pakistan, cryptocurrency is not considered legal tender, but rather a commodity or digital asset subject to regulatory oversight.

This post explores how both countries view crypto through the lens of securities law, anti-corruption statutes, financial surveillance, and commodities regulation, including the Howey Test, SEC, FIA, FinCEN, and Commodity Exchange Acts.

Cryptocurrency in the United States: Not Legal Tender, But Heavily Regulated

Not Legal Tender

The U.S. Department of Treasury has made it clear: Cryptocurrency is not legal tender. Only the U.S. dollar (USD) is recognized as legal tender under 31 U.S.C. § 5103.

Treated as a Commodity or Security

Depending on its structure and use, cryptocurrency may be regulated as a commodity, a security, or both:

Commodity Classification

Under the Commodity Exchange Act (7 U.S.C. § 1 et seq.), the Commodity Futures Trading Commission (CFTC) treats most cryptocurrencies (like Bitcoin and Ethereum) as commodities.

  • This gives the CFTC authority over fraud and market manipulation in crypto spot and derivatives markets.

Security Classification & The Howey Test

When determining if a crypto token is a security, courts and regulators apply the Howey Test, established by the U.S. Supreme Court in SEC v. W.J. Howey Co., 328 U.S. 293 (1946). A digital asset is a security if:

  1. It involves an investment of money
  2. In a common enterprise
  3. With the expectation of profit
  4. Derived from the efforts of others

If a token meets this test, it is subject to U.S. securities laws, including:

  • Securities Act of 1933 – Registration requirements (15 U.S.C. § 77a)
  • Securities Exchange Act of 1934 – Ongoing reporting and disclosure (15 U.S.C. § 78a)
  • SEC Rule 10b-5 – Prohibits fraud in connection with the purchase or sale of any security

U.S.A. SEC & FinCEN Oversight

  • SEC (Securities and Exchange Commission): Enforces securities laws and cracks down on unregistered ICOs and fraud.
  • FinCEN (Financial Crimes Enforcement Network): Requires crypto exchanges and wallets to comply with anti-money laundering (AML) and know-your-customer (KYC) rules under the Bank Secrecy Act (31 U.S.C. § 5311 et seq.).

Foreign Corrupt Practices Act (FCPA) & Crypto

The FCPA (15 U.S.C. §§ 78dd-1 to 78dd-3) prohibits U.S. persons and entities from using crypto to bribe foreign officials. Cryptocurrency transactions do not exempt companies from the anti-bribery and accounting provisions of the law.

Cryptocurrency in Pakistan: Unregulated and Risk-Prone

Not Legal Tender

The State Bank of Pakistan (SBP) does not recognize cryptocurrency as legal tender. In fact, a 2018 circular explicitly prohibited banks and financial institutions from dealing in crypto.

Treated as a Risky Asset, Not a Commodity

While Pakistan lacks a formal regulatory framework like the U.S., crypto may loosely fall under commodity and fraud laws if traded or sold:

Relevant Pakistani Laws and Agencies

  1. Federal Investigation Agency (FIA): Investigates cybercrime, crypto fraud, and Ponzi schemes. The FIA has actively pursued crypto scams involving millions of dollars.
  2. PECA Act (Prevention of Electronic Crimes Act, 2016): Can be invoked in cases of crypto-related fraud, money laundering, or data theft.
  3. Foreign Exchange Regulation Act (FERA), 1947: May apply to cross-border crypto transactions.
  4. Pakistan Mercantile Exchange (PMEX): The only licensed commodity futures exchange in Pakistan, but crypto assets are not currently traded or regulated through PMEX.

Legal Risks in Pakistan

  1. Crypto is not banned outright for individuals, but it’s high-risk, and victims of fraud have limited legal recourse.
  2. No consumer protection or licensed platforms exist.
  3. Fraudsters often operate outside formal banking systems, making prosecution difficult.

Legal Takeaways for Clients

JurisdictionLegal Tender?Treated AsKey Laws
United States NoCommodity or Security7 U.S.C. § 1, 15 U.S.C. § 77, § 78, Howey Test, FCPA, Bank Secrecy Act
PakistanNoUnregulated AssetFIA Act, PECA 2016, FERA 1947, SBP Circular

Final Thoughts

Cryptocurrency is not legal tender in either the U.S. or Pakistan—but both countries are actively regulating it through securities, anti-fraud, anti-money laundering, and commodity frameworks. Whether you’re launching a blockchain project, investing in digital assets, or facing fraud accusations, the regulatory landscape is high-stakes and fast-moving.

Need crypto law guidance across borders? Contact Law Office for expert legal counsel on blockchain compliance, SEC defense, FinCEN registration, and cross-border asset recovery.

Leave a comment