‘Regulated crypto trade can prove a revenue goldmine for Pakistan’

ISLAMABAD: Pakistan can generate revenues worth at least $90 million (around Rs19 billion) annually through a 15 percent tax on the trade of cryptocurrency under hard-and-fast regulations, industry officials said on Tuesday.

Last year, Pakistan’ total crypto transactions were recorded at $20 billion. Out of which the earned profit was $650 million. “The US and India are collecting billions of dollars through a 30 percent tax on the profit earned from crypto trading. We can start with a 15 percent tax,” said Zeeshan Ahmed, Country General Manager Rain Financial Inc, at a discussion on the role of crypto assets/currency in the economy with journalists.

Ahmed was flanked by Aatiqa Lateef, Director of Public Policy Rain Financial Inc. It has been observed all over the world that regulators initially tend to oppose it but as the trend gathers momentum they join the party by bringing this phenomenon under the regulatory regime, Ahmed said.

“We are in constant touch with all regulators including SBP, PTA, and FBR and others and will be ready to assist them,” Ahmed said adding that the government had constituted committees to deliberate upon different scenarios and come up with the policy to regularise crypto as an asset or currency.

He said the government might take 12-18 months to make up its mind for it. “For proper security, the crypto transactions should be treated as legal and placed under regulations following which they can consider barring conversion from Crypto into rupee account outside the country. If required they would be ready to accept more regulations in order to ensure security,” he added.

He said the biggest challenge was the initial capacity building needed for all regulators. “The crypto is a very new phenomenon and without the requisite due diligence and technical guidance from companies such as Rain, it is difficult for any regulator anywhere to quickly understand new technologies,” the country manager of the IT firm said.

Aatiqa Lateef Pakistan ranked highly among emerging market players in the crypto asset industry, as the country held $20 billion in cryptocurrency in 2020-21.

“Pakistan also stands out among emerging market players in the crypto asset industry being third in Chain Analysis 2021 Global Crypto Adoption Index with market growth of 711 percent from 2020-2021,” Lateef added. “There have been some concerns from investors over the high tax bracket, there has been a lot of positives on the regulation of the industry rather than an outright ban.”

Considering the size of the crypto market in India and the potential growth there would be a huge boon to the government coffers every year, Lateef said.

“This tax clarification will encourage investors and companies to operate, as well as move the industry towards a more regulated environment - minimising bad actors or players.”

She said India was able to empower the country’s Computer Emergency Response Team (CERT) to police the industry as a clear framework allowed them to keep tabs on the industry and clarify what authority had the power to curb any suspicious or illicit activity. “This is a boon to both companies and individuals operating in the space,” Lateef said.

The move requires crypto businesses, such as virtual asset service providers, to keep Know Your Customer (KYC) information and records of financial transactions for five years to ensure cyber security in the area of payments and financial markets for citizens, while protecting their data, fundamental rights and economic freedom in view of the growth of virtual assets, she concluded.