Many in Pakistan were furious and outraged following the recent government decision to ban cryptocurrencies in the country. “I oppose the government's decision to ban cryptocurrencies. I am challenging this decision in court and fighting for our right to use cutting-edge technologies,” said Umair Orakzai, a crypto-influencer. Another crypto-focused community, Crypto Awaz, has questioned lawmakers about the rationale for imposing a blanket ban on digital currencies, rather than regulating them. Ergo, the state of cryptocurrencies in Pakistan is worth looking at.
I oppose the government's decision to ban cryptocurrencies. I challenge this decision in court and fight for our right to use cutting edge technologies. Let's unite to build a brighter digital future for Pakistan!#crypto #Pakistan
— Umair.eth (@Umairorkz) May 18, 2023
The controversy began after the Pakistani government flatly rejected the idea of legalizing cryptocurrency trading, leaving the country's growing community of crypto fans in a quandary. Speaking at a session of the Senate Standing Committee on Finance and Revenue, Minister of State for Finance and Revenue Aisha Ghaus Pasha said that banning cryptocurrencies is one of the requirements put forward by the Financial Action Task Force (FATF) that removed cryptocurrencies. Pakistan off your gray list. last year.
Here, the FATF is the global money laundering and terrorist financing watchdog that removed Pakistan from its “enhanced supervision” list after four years.
The move won the support of officials at the country's central bank. The State Bank of Pakistan (SBP) and the Minister added that the SBP and the IT Ministry have started preparing the draft legislation.
However, many members of the Pakistani crypto community are not convinced. For example, well-known YouTuber and crypto-influencer Waqar Zaka questioned why Pakistan is denied access while the United Arab Emirates, which is also greylisted, continues to grow as a crypto hub.
Take a moment to watch this video! 🎥 Why is he @FATFNews Stop the Pakistani government and ordinary citizens from tapping into the potential of cryptocurrency? @CMShehbaz @Cointelegraph @CoinDesk @CNN @BBCBreaking @CNBC #FATFReplyNow #Cryptocurrency #Pakistan pic.twitter.com/V4btlmxQBS
—Waqar Zaka (@ZakaWaqar) May 18, 2023
The history of Pakistan's crypto regulations
The ban on trading virtual assets in the South Asian nation has not come like a bolt of lightning. In 2018, the SBP issued a circular stating that digital assets such as Bitcoin [BTC] and Litecoin [LTC] they were not recognized as legal tender by the government. He also ordered banks and other financial service providers not to deal with cryptocurrency exchanges.
According to Pakistan express grandstand, the government had established three separate committees to decide whether to establish a legal framework for cryptocurrencies or ban them. One of the commissions headed by the Deputy Governor of the SBP proposed to ban the use of cryptos in the country in January 2022.
Pakistan's Growing Crypto Adoption
The use of crypto has increased significantly in Pakistan in recent years. The country ranked third in the Global Crypto Adoption Index by 2020-21, according to the blockchain data platform Chainalysis. It is understandable that this happened during the famous bull cycle in which Bitcoin skyrocketed from $9,000 to $69,000.
Also, a investigation study conducted by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) revealed that Pakistanis held nearly $20 billion worth of crypto assets during 2020-21, reflecting an astronomical increase of over 700%.
However, due to the general market slowdown and the aforementioned regulatory crackdown, the country fell to sixth position in the ranking. 2022 report. However, the data also revealed that there is a higher level of awareness and demand for virtual currencies in the nation.
Has the government missed a trick?
Pakistan is in the throes of a severe economic crisis, characterized by skyrocketing inflation, soaring public debt and rapidly falling foreign reserves. The Pakistani rupee (PKR) has plunged to record lows against the US dollar (USD), with one dollar equivalent to 286 Pakistani rupees at press time.
In the event of such a devaluation, cryptocurrencies like stablecoins could have acted as a hedge against price fluctuations. Like stablecoins like Tie [USDT] are tied to a stable asset like the USD, people can convert their savings into stablecoins to gain exposure to the dollar.
In essence, cryptocurrencies have been found to be beneficial to countries experiencing political and financial instability. The Chainalysis report also noted in its observations that lower-middle-income and upper-middle-income countries tend to be more dependent on cryptocurrencies than other countries.
Ergo, only time will tell us about the final state of crypto in Pakistan.
