The crypto race

Compared to its regional peers, Pakistan initially showed reluctance to embrace cryptocurrencies. In 2018, the State Bank of Pakistan (SBP) prohibited the use of virtual currencies. In 2024, however, the SBP proposed amendments to the State Bank of Pakistan Act, which would recognise digital assets as legal. This also marked a shift in the government’s approach towards the highly popular asset. In March, the finance ministry established the Pakistan Crypto Council (PCC). This new advisory body aims to regulate and integrate blockchain and digital assets into the nation’s financial system. The CEO of the PCC is also in talks with global leaders like World Liberty Financial and the former CEO of Binance. Pakistan’s progress on the crypto front is laudable. It seems that authorities are now making up for the lost time. The government now says that it wants to empower its youth, freelancers and startups by making a thriving crypto ecosystem.

The country’s marvellous rise has also irked its rival, India, which now alleges Pakistan uses its tech image as a facade to buy global influence. That our rivals are angry at our progress is proof that we are doing something right. It is good that the country is moving towards regulating digital assets and cryptocurrencies instead of imposing a blanket ban. The Securities and Exchange Commission of Pakistan (SECP) is expected to become more open to registering businesses with crypto and digital asset-based models, moving beyond the current sandbox limitations. This could lead to licensed crypto exchanges operating in Pakistan, making crypto trading legal and likely subject to taxation. However, banks will likely remain unable to trade or exchange cryptocurrencies as the SBP has yet to establish guidelines.

Pakistan has recently allocated at least 20,000MW of power to support Bitcoin mining and data centres. This is a good step that can potentially help us get ahead in the race for virtual assets. However, this should not push us away from caution. While it is good that we are utilising our idle energy to get ahead on the crypto front, it is also important to work on the potential transmission issues. Experts believe that the abundance of energy is in the country’s south, while power-hungry data centres are in the north. It is important to have a strong infrastructure to make the transmission smooth. Similarly, the reason cryptocurrencies were banned in the first place was the ease they provided to certain extremist elements regarding fund transfer. This problem has not disappeared. A few months ago, a crypto trader was kidnapped and was made to pay ransom in the form of virtual assets. As we move towards liberalising our economy, it is also important to focus on strict regulations so that a highly viable asset does not end up in the wrong hands. Pakistan also has to leave its extreme approaches behind and work towards building a conducive environment for adopting innovative products.