Can govt tackle cryptocurrencies?

Can govt tackle cryptocurrencies?

Pakistan Embraces Cryptocurrency Amid Trump’s Victory, Experts Push for Proper Regulations

The 2024 U.S. presidential election win of Donald Trump has reignited interest in cryptocurrencies globally, nudging countries like Pakistan to recognize digital assets as a reality, experts say. However, they caution that adopting the right regulations at the right time is essential to avoid missteps.

A small crypto trader, speaking anonymously, noted that while cryptocurrencies remain a grey area in Pakistan, the popularity of Binance, one of the largest crypto exchanges, indicates that the asset is not outright illegal. "People are drawn to crypto because of its high liquidity and low barriers to entry," the trader explained, contrasting it with real estate investments that have seen rising prices and low liquidity.

Pakistan's Changing Stance on Crypto

Despite a 2018 ban by the State Bank of Pakistan (SBP), Pakistani authorities are now moving toward legalizing cryptocurrencies. On January 8, a lawmaker from the ruling PML-N party introduced the Virtual Assets Bill 2025 to establish a regulatory framework for digital assets.

Arsalan Khan, a Web3 and digital asset consultant, emphasized the need for Pakistan to adapt to global trends. However, he warned against treating cryptocurrencies purely as trading assets, advocating instead for policies that support blockchain technology's broader applications.

Rising Crypto Adoption

Blockchain analytics firm Chainalysis ranked Pakistan ninth in its 2024 Global Crypto Adoption Index, with unofficial figures suggesting around 20 million crypto users. However, the high number of accounts doesn't equate to substantial trading volumes.

The proposed Virtual Assets Bill aims to peg cryptocurrencies to the Pakistani rupee, ensuring currency stability and building trust. However, critics argue that pegging crypto to the rupee contradicts the decentralized nature of digital assets.

Safety Concerns and Market Volatility

Concerns over security were highlighted in December when a crypto trader was kidnapped in Karachi, with the kidnappers using the victim's Binance account to transfer ransom. The incident underscores the need for secure systems and robust regulations.

Cryptocurrencies’ volatile nature is another challenge. Bitcoin, for instance, saw a dramatic drop from nearly $70,000 in 2022 to below $19,000 but rebounded during Trump’s campaign when he endorsed digital assets.

Proposed Solutions for Oversight

Khan suggested linking crypto trading with banking systems and requiring Know Your Customer (KYC) compliance for onchain wallets and centralized exchanges. This would allow authorities to monitor transactions, collect taxes, and build an infrastructure to oversee the flow of funds.

However, Khan expressed doubts about the government’s approach, fearing it might focus solely on taxing capital gains or on/off ramping phases, which he deemed insufficient to manage the complexities of cryptocurrencies.

Conclusion

With global momentum shifting toward crypto acceptance, Pakistan faces a pivotal moment. Proper regulations, secure systems, and a forward-looking approach are critical to ensuring that the country benefits from the digital asset revolution while safeguarding against potential risks.