Despite retailers in Pakistan turning to cryptocurrencies as a hedge against a devaluing Pakistani rupee and political instability, the government has taken a firm stance against digital currencies. Minister of State for Finance and Revenue, Aisha Ghaus Pasha, stated in a Senate Standing Committee on Finance meeting that cryptocurrencies would never be legalised in Pakistan. The decision is reportedly influenced by the conditions set by the Financial Action Task Force (FATF), an international finance watchdog, to avoid being placed on its “Grey List.”
Pasha also instructed the State Bank of Pakistan (SBP) and the Information Technology Ministry to ban cryptocurrencies following the SBP’s announcement in January 2022 that it intended to prohibit crypto-related activities. Several banks in Pakistan have already informed customers that crypto trading is illegal, citing regulatory instructions from the SBP. The warnings highlight the risks and illegality of remitting foreign exchange for overseas crypto trading through payment channels.
Despite the government’s efforts, cryptocurrencies have gained popularity in Pakistan. Annual trading volume for Pakistan-based crypto wallets has increased from $18-20 billion to $25 billion, according to Zeeshan Ahmed, the country general manager at Rain Financial, a cryptocurrency trading platform based in the Gulf.
The attempt to ban crypto coincides with political turmoil in Pakistan. Former Prime Minister Imran Khan, recently released after being arrested on corruption charges, is in a tense standoff with the police at his residence in Lahore, leading to widespread protests. The resulting political and financial instability has prompted Pakistani retailers to convert their salaries into stablecoins to safeguard against economic uncertainty.
Ali Farid Khwaja, chairman of KTrade Securities and CEO of BlockTech Pakistan, suggests that people in Pakistan are buying USDT on crypto platforms to gain exposure to the US dollar due to fears of sovereign default and the government’s inability to secure IMF support. Even Bitcoin has demonstrated strength against the Pakistani rupee, attracting over 20 million Pakistanis to open accounts on crypto platforms during the crypto boom.
Bilal Bin Saqib, a blockchain investor, points out that the Pakistani rupee has depreciated by a significant 57.4% against the US dollar in the past year. For many citizens, stablecoins have become the most accessible means of accessing the US dollar, as import restrictions impede physical dollar acquisition.
