The annual trading volume of cryptocurrencies for Pakistan-based wallets has increased to $25 billion, up from $18-20 billion a year ago, according to Zeeshan Ahmed, country general manager at Rain Financial, a cryptocurrency trading platform based in the Gulf.
The State Bank of Pakistan (SBP) does not recognize crypto assets, which are decentralized digital currencies with verified and recorded transactions. Last year, the SBP issued a formal notice advising the public to exercise caution and refrain from trading cryptocurrencies.
The estimated annual crypto transaction volume for Pakistan-based wallets is $25 billion.
Rain Financial, which is actively attempting to persuade the SBP to recognize cryptocurrencies, estimates that the annual trading volume of these digital assets has increased by 25 to 39% in the past year alone.
Mr. Ahmed believes the number of crypto wallets, which contain the keys to investors’ digital coins stored on public blockchain networks, has nearly doubled from five to six million a year ago to nine to ten million.
There is no official information regarding the extent of crypto commerce in Pakistan. The SBP did not respond to a request for comment immediately.
Dividing the annual trading value by three is a rule of thumb that is frequently used by experts to arrive at a rough estimate of total crypto asset holdings. Using this loosely defined criterion, it can be inferred that Pakistani wallets hold crypto assets worth $8.3bn at any given time.
How then do people purchase and sell cryptocurrencies if the central bank has outright prohibited the practice?
According to experts, the procedure is as easy as pie. One of the most common strategies for investing in cryptocurrencies involves registering a wallet on a trading platform such as Coinbase and then requesting a friend or acquaintance abroad to purchase and deposit assets on your behalf. In exchange, the final buyer in Pakistan transfers the equivalent quantity in rupees to the overseas Pakistani’s local bank account.
Buying and trading cryptocurrencies is also possible through local crypto traders. They already possess coins acquired through the illicit money transfer system. They serve as the counterparty for anyone looking to purchase or sell crypto assets with fiat currency. Person-to-person remittances are yet another method of exchanging cryptocurrencies. One receives the digital currency in their wallet and then transmits the funds to the seller’s bank account.
Mr. Ahmed states that his efforts to persuade have not produced concrete results, but the situation is not hopeless. Given the state of the economy as a whole, the government and regulators are in firefighting mode. Innovative strategic initiatives are currently on hold. But that doesn’t mean we’ve given up. “There are still many conversations taking place with all parties involved,” he said.
Under the condition of anonymity, a technology entrepreneur with a history of numerous successful projects disclosed to Dawn that he has been “in close contact” with Coinbase and Binance, two of the most prominent cryptocurrency exchanges in the world, regarding their potential entry into the Pakistan market.
They are eager to begin operations here. However, the regulator in this case is hesitant. “I’ve proposed to the SBP that we formalize crypto trading using geo-fencing,” he said.
The expected outflow of dollars from Pakistani purchases of assets on foreign exchanges appears to be one of the primary obstacles to legalizing crypto trading. He stated that geofencing addresses this issue to a great extent.
A person’s country of origin must be disclosed when establishing an account on a cryptocurrency exchange. According to him, the two prominent cryptocurrency exchanges have consented to implement geo-fencing. This ensures that any crypto assets held in Pakistan-based wallets will only be sold to other Pakistan-based wallets. “Geo fencing will ensure that the $6 billion to $10 billion in crypto assets held by Pakistanis will remain in Pakistan,” he said, adding that the government can also collect taxes on these holdings.
Ejaz Ali Shah, managing director of the Pakistan Mercantile Exchange (PMEX), told Dawn that he is anxious to launch cash-settled futures contracts for cryptocurrencies. However, once the SBP recognizes cryptocurrencies as assets, this will become feasible, he said.
On a daily basis, the only commodity futures exchange in the country enables approximately 25,000 investors to purchase and sell contracts ranging from gold, silver, oil, and gas to copper, palladium, and even global stock indexes. With the exception of a few gold contracts that are deliverable, these futures contracts are all cash-settled. In other words, their values are determined by international prices, but payment is made in rupees.
“It is my opinion that the PMEX should offer crypto futures contracts,” he said, emphasizing that the cash-settled nature of such contracts would result in no foreign exchange outflow.
