Pakistan Bans Cryptocurrencies: Adoption Persists Amid Economic Turmoil. Despite the government's prohibition, individuals in Pakistan continue to embrace cryptocurrencies as a hedge against a devaluing rupee and volatile political situation, driving increased trading volume and adoption.
Pakistan has recently announced a fresh ban on cryptocurrencies, asserting that they will "never be legalized in Pakistan," according to Minister of State for Finance and Revenue Aisha Ghaus Pasha. The government's decision to prohibit all internet-based crypto services comes at a time when cryptocurrencies have gained popularity among Pakistanis as a hedge against the devaluing Pakistani rupee and the nation's volatile political situation.
During a meeting of the Senate Standing Committee on Finance and Revenue, Minister Aisha Ghaus Pasha revealed that the Financial Action Task Force (FATF) had set a condition for Pakistan to keep cryptocurrency off the international finance watchdog's "Grey List." The government's decision to ban cryptocurrencies is in line with the conditions established by the FATF, which aims to combat money laundering and terrorism financing.
To enforce the ban, the State Bank of Pakistan (SBP) and the Ministry of Information Technology have been ordered to work on implementing the ban. Banks in Pakistan have already begun informing customers that cryptocurrency trading is illegal, citing regulatory instructions from the SBP. The warnings highlight the inherent risks associated with crypto trading and emphasize that such transactions are prohibited.
Despite the ban, cryptocurrencies are gaining popularity in Pakistan. According to Zeeshan Ahmed, the country general manager at Rain Financial, a Gulf-based trading platform for cryptocurrencies, the annual trading volume for Pakistan-based wallets has increased to $25 billion, up from $18 billion to $20 billion the previous year. Many individuals in Pakistan are turning to stablecoins as a means to access the US dollar, as the acquisition of physical dollars is hindered by import restrictions in place.
The ban on cryptocurrencies in Pakistan coincides with a period of political turmoil in the country. Former Prime Minister Imran Khan was recently arrested on corruption allegations and released after the Supreme Court ruled the arrest unlawful. This has led to widespread protests, contributing to the unstable political climate. The Pakistani rupee has also experienced a significant decline, sliding 3.3% to an all-time low against the US dollar. As a result, retailers in Pakistan are converting their salaries into stablecoins as a hedge against the devaluation of the rupee.
While the ban on cryptocurrencies may present challenges for the Pakistani crypto community, the demand for digital assets persists. Despite the government's attempts to curb crypto trading and mining, these activities continue to thrive in the country. The Pakistani government's decision to ban cryptocurrencies reflects its compliance with international standards set by the FATF but also highlights the ongoing interest and adoption of cryptocurrencies within the country.