The Rise of Cryptocurrencies in Pakistan: An Overview of the Current Landscape

Published on September 15, 2024
By: Xalyur Immudetes
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Continuing our South Asia tour, we focus on Pakistan, the world’s fifth most populous country with nearly 236 million people. The Central Bank does not recognize cryptocurrencies as a legal form of payment, and in May 2023, the Finance Minister declared that crypto assets will never be legal in the country. However, this hasn’t hindered their widespread adoption among citizens, which continues to grow. In the latest Chainalysis index, Pakistan ranked eighth (looking back to 2021, the country was third in the same index). These consistent rankings over the years indicate that cryptocurrencies are here to stay in this Islamic republic.

In mid-2023, KuCoin, a major cryptocurrency exchange, released a study titled “Into the Cryptoverse: Understanding Pakistani Crypto Investors 2023”. The survey found that one in ten crypto investors in Pakistan prefers to receive or pay cryptocurrency salaries. It also revealed that most crypto investors are men, with millennials (ages 26 to 39) being the largest age group. Many of these investors have annual incomes of less than 5 million rupees. The main reasons for investing in crypto are wealth accumulation and protection against inflation.

The Securities and Exchange Commission of Pakistan (SECP) has debated how to handle the crypto sector for years, but clear regulations have yet to be established. In 2022, rumors about a potential crypto ban surfaced, and last year, following Aisha Ghaus Pasha’s statements that legalization would never be possible, it became evident that this intention exists within the government. Authorities frequently argue that this technology could be used for illicit activities, a concern they first raised in 2018. Nevertheless, crypto activities have persisted in the country.

Pakistan’s crypto community continues to grow, driven by prominent influencers, bloggers, and advocates who educate others about the digital economy. Even if top officials impose strict bans, this community is likely to remain resilient and expand. Many people are already accustomed to using platforms like Binance, Kraken, and Coinmama to trade crypto assets.

“Crypto trading apps are among the most popular downloads in Pakistan, indicating a strong demand for accessible ways to buy, trade, and use cryptocurrencies and other digital assets. The government should not stand in the way.

The potential for cryptocurrencies to democratize finance depends on governments allowing their citizens access to these new markets. Crypto’s benefits far outweigh any drawbacks, especially for unbanked communities around the world”.

–Reeve Collins, co-founder of BLOCKv.

“Cryptocurrencies offer a chance to build wealth. Notably, Bitcoin is one of the top assets by market capitalization”.

–Kunal Sawhney, CEO of Kalkine Group.

Although Bitcoin isn’t legally recognized as a payment method in Pakistan and isn’t currently taxed, it’s notable that the IMF urged the country in March to include crypto investments in its capital gains tax regulations. This was a condition for securing a $3 billion loan intended to alleviate the country’s severe economic crisis. While many financial problems started in 2021 and 2022, the situation worsened dramatically in 2023: per capita GDP fell by 11%, around 900,000 skilled workers left the country, and annual inflation surged past 36%. This crisis has driven even more people to seek refuge in the crypto sector.

Crypto adoption in Pakistan continues to grow despite restrictions and the lack of legal recognition. The increasing interest, especially among young people, in using crypto for wealth building, sending remittances, and protecting against inflation highlights a strong demand for financial alternatives amidst the economic crisis. Even though the future of crypto regulation in the country is uncertain, the commitment of its citizens to embrace digital assets is truly impressive.

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