Cryptocurrencies in Pakistan — A Shady Area Forever?

Bitcoin had a market capitalization of $1072.21 billion as of February 21st, 2021. The global blockchain market is expected to rise to $23.3 billion by the year 2023. These figures are jawbreaking, considering the relatively short time since cryptocurrencies were bought into existence.

Bitcoin was the world’s first decentralized cryptocurrency that was created back in 2009 and has now become a fixture in the news. Last year in October 2021, the official launch of the very first Bitcoin exchange-traded fund secured an investment worth $550 million initially on the very first day. Not just this but its prices even hit an all-time high, crossing $66,000 per Bitcoin.

We’ve also witnessed a massive spike of the “crypto-mania” over the past few months in the country.

Pakistan has reportedly ranked third globally, after India and Vietnam, in crypto adoption metrics. Binance, a cryptocurrency exchange, is one of the country’s top downloaded apps. With social media is buzzing with crypto investment advice, almost everyone seems to be wanting to invest in this rogue digital currency.

For some time now, Bitcoin enthusiasts have been making continuous efforts to get crypto-related rules and regulations devised and put to action. With an aim, to acknowledge the surging influence of the currency and educate the masses regarding it, the Sindh High Court set up a committee last year, to look into the matter and formulate methods to legalize the transaction of cryptocurrencies in the country.

What started as an underground experiment by a handful of programmers has now become a trillion-dollar ecosystem that has gradually attracted the attention of many of the businesses as well.

As of now, Bitcoin, valued at $1.2 trillion, exceeds the market cap of Tesla and Facebook, and is significantly bigger than all the payment giants like Mastercard, PayPal and Visa put together. In a recent rally, the combined cryptocurrencies universe reached a value of 2.2 trillion dollars, outpacing tech behemoth Apple, which before this turn of events was the world’s most valuable company.

Furthermore, a price-tracking website showcases over 6,000 entries of crypto, providing the masses with a plethora of cryptocurrencies to play around with. While most of these, such as Litecoin and Dogecoin, are little more than Bitcoin copycats, there are also some truly impressive innovations like the Ethereum, that goes beyond mere currency and provide a platform to create complex decentralised contracts and applications. Ripple is an efficient medium to send remittances and settle payments. Cardano tops the list of ‘green’ cryptocurrencies, with an energy footprint less than 0.001 percent of Bitcoin. Zcash and Monero incorporate privacy-enhancing technologies

So, while the world enjoys the perks of crypto, what is Pakistan doing about it?

The case of crypto is quite curious in Pakistan’s financial landscape. With the government still trying and somewhat struggling to weigh the possibilities of opening avenues for cryptocurrency in the country, while at the same time trying to devise regulations related to crypto to keep the masses safe from any relevant scams like fraud and prevent capital flight, money laundering and tax evasion. All of this, however, has not stopped many from taking financial risks and trying their luck in the world of crypto. Because of the crypto enthusiasts today, the cryptocurrency space has exploded in size over the last decade, with innovations and a collective market capitalization of more than $2.5 trillion.

According to the country-level data analysis, the top three countries globally in terms of crypto user counts are: India, the United States of America, and Nigeria, with 100 million, 27 million, and 13 million users, respectively. The crypto users in India are only 7.3% of the total population, while Pakistan has about nine million users, a meagre 41% of the population.

This data suggests, that almost half of Pakistan’s population not only holds knowledge about crypto but is also contributing to its market capitalization by investing in it. The stats also suggest, that while the government might presently struggle to come to a viable consensus regarding crypto, it won’t stay like this for long. However, while the FIA actively investigates cryptocurrency use among citizens to the point where the Sindh High Court has had to restrain them from harassment, matters are even further complicated by the Financial Action Task Force (FATF), which has asked the government to better regulate cryptocurrencies.

There are plans to set up Bitcoin-mining operations in KPK. In several cases, it may be more profitable to simply buy and hold bitcoins in the long run than to set up expensive infrastructure to mine them from scratch.

Overall, for now, there doesn’t seem to be some grand foresight of crypto in Pakistan but perhaps putting the related laws and strategies to action, might bring out crypto into the spotlight and get more people familiarized with the concept of digitized currency.

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