Islamabad, Pakistan – Consider it a cryptocurrency revolution.
Amid the flags of Pakistan, Changpeng Zhao, the founder of Binance, the leading cryptocurrency exchange globally, signed on Monday to serve as an adviser to the newly established regulatory body for the sector.
After years of hesitance towards digital currencies, Islamabad initiated the Pakistan Crypto Council (PCC) in March, aimed at fostering innovation in the field while also creating a regulatory environment that safeguards both investors and the financial system.
By securing one of the industry’s most prominent figures as an adviser to the PCC, Prime Minister Shehbaz Sharif’s administration seems intent on conveying a message of openness to cryptocurrency during a turbulent time for the global economy, analysts noted.
“We are sending a clear message to the world: Pakistan is open for innovation,” Finance Minister Muhammad Aurangzeb remarked, calling Zhao’s appointment a “landmark moment”.
“With CZ on board, we are fast-tracking our vision to position Pakistan as a regional leader in Web3, digital finance, and blockchain-driven growth,” Aurangzeb added, using Zhao’s widely recognized initials.
Zhao, a Canadian tech entrepreneur originally from China with a personal fortune estimated at over $60 billion, served a brief prison term in the United States last year after admitting to breaching US anti-money laundering laws. Nevertheless, his reputation in the cryptocurrency landscape remains untarnished.
Pakistan’s Ministry of Finance stated that Zhao will collaborate closely with the government to cultivate a “competitive crypto ecosystem” and provide advice regarding “regulation, infrastructure, education, and adoption”.
“Pakistan is home to 240 million individuals, over 60 percent of whom are under the age of 30. The potential here is boundless,” Zhao was quoted in the ministry’s announcement.
The hiring of Zhao represents the latest in a series of initiatives by the Sharif administration aimed at regulating and incorporating cryptocurrency innovations within the national financial framework.
In 2018, Pakistan’s central bank prohibited financial institutions from engaging in cryptocurrency transactions. However, the country’s stance on crypto seems to be shifting.
Alongside the PCC’s establishment, Bilal bin Saqib, a British Pakistani tech entrepreneur, was appointed as “chief adviser” to Finance Minister Aurangzeb.
After his appointment last month, Saqib stated that Pakistan already has a significant number of cryptocurrency users.
“Approximately 15 to 20 million Pakistanis currently hold crypto assets. The country facilitates billions of US dollars in crypto transactions, so we certainly wish to legalize this. Our aim is to establish a transparent regulatory framework that attracts investments and allows the ecosystem to thrive in Pakistan,” he commented in an interview.
Observers reference the influence of former US President Donald Trump’s pro-crypto stance as prompting Pakistan to reevaluate its position, a sentiment reflected in the PCC’s creation and Zhao’s recruitment.
Initially critical of cryptocurrencies during his first term, Trump has since revised his perspective.
Shortly after taking office in January, the US president signed an executive order to form a presidential working group tasked with proposing new laws and regulations concerning cryptocurrencies.
Recently, he announced the inclusion of five cryptocurrencies, including Bitcoin, in a proposed new US strategic reserve.
Saqib also acknowledged Trump’s effect on global cryptocurrency regulations.
“Trump is prioritizing cryptocurrency on a national scale, and every nation, including Pakistan, will have to adapt,” he stated.
Does Pakistan need cryptocurrency?
Despite the absence of concrete data on the number of Pakistani cryptocurrency users, Similarweb, a site tracking mobile app downloads, indicates that the Binance app ranks as the fourth most downloaded finance app in Pakistan.
Ali Farid Khwaja, an investor and chairman of KTrade Securities, a leading brokerage in Pakistan, expressed that digital assets like cryptocurrencies signify an evolution in digital finance that has led to more efficient systems for financial transactions.
“Regulating cryptocurrency is essential for Pakistan. With roughly 20 million citizens already participating in offshore global trading platforms, the government currently collects no taxes, as those platforms lack local licensing,” Khwaja stated to Al Jazeera.
He emphasized that regulation does not equate to a blanket approval.
“Thus far, Pakistan has opted to disregard it. Now, the phenomenon has grown too substantial and gained too much global traction to naively continue the approach of ignoring its existence. Therefore, establishing a council is a positive step forward,” Khwaja added.
Yet, some experts remain skeptical, questioning the relevance of cryptocurrency for a country like Pakistan.
Ibrahim Khalil, a finance professional based in Canada, warned that Pakistan risks joining a trend that other nations have already abandoned.
“Pakistan requires cryptocurrency like a fish needs a bicycle. The focus appears to be on promoting crypto and blockchain without clearly defining the problems they solve. Globally, blockchain has often failed to meet its expectations, and aside from Bitcoin, there is no compelling success narrative,” Khalil remarked to Al Jazeera.
Bitcoin was the first decentralized digital currency, created by the pseudonymous Satoshi Nakamoto in response to the 2007–08 global financial crisis. Nakamoto introduced the blockchain technology, a digital ledger that processes transactions across a network of computers, to facilitate financial exchanges without reliance on banks, financial institutions, or governments.
Will Pakistan succeed in regulating cryptocurrencies?
The appeal of cryptocurrencies lies significantly in their “peer-to-peer” model, enabling users to execute digital transactions via a decentralized network while maintaining anonymity.
Khalil asserted that the PCC’s objective to regulate cryptocurrency undermines one of its most appealing characteristics: evading oversight and taxes.
He noted that if a crypto fund registered with the Pakistan Stock Exchange were to materialize, it might necessitate the establishment of a specialized workforce of auditors and regulators to oversee crypto holdings.
“However, this remains uncertain, as such a fund would demand robust custody arrangements, skilled auditors familiar with crypto’s complexities, and a regulatory environment capable of managing market manipulation and safeguarding investors,” he added.
KTrade’s Khwaja also mentioned that, similar to companies offering stocks and mutual funds, entities providing financial products for trading and investment should fall under regulation.
“This ensures that investors comply with the necessary Know Your Customer and anti-money laundering regulations while paying the appropriate taxes. Additionally, it means that the regulator will protect individuals from scams and penalize wrongdoers,” he elaborated.
Khwaja believes regulation could lead to a decline in crypto use, as potential users might be “less inclined” to create accounts requiring them to disclose their income sources and pay taxes.
“A more appropriate strategy would be to foster responsible and regulated adoption rather than mere acceptance. This implies that unregulated offshore platforms should be banned immediately with stringent enforcement. Furthermore, firms offering these services should adhere to all local regulations.”
Does Pakistan have the infrastructure to support cryptocurrencies?
Ranked 97th in mobile internet speed and 142nd in broadband speed worldwide, Pakistan’s inadequate digital infrastructure stands as a significant obstacle to crypto adoption, experts argue.
Frequent electricity shortages, especially during summer months, continue to pose challenges for consumers, while energy costs remain high.
Bitcoin, the leading cryptocurrency, is limited to 21 million coins as designated by Nakamoto. As of December 2024, 19.9 million have been mined, leaving approximately 1.1 million yet to be produced.
Bitcoin mining requires the solving of complex mathematical problems for transaction verification, a process that demands substantial power and is typically carried out in vast data centers.
Khawaja noted that Pakistan has “missed the boat” on crypto mining but mentioned that countries like the United Arab Emirates are increasingly adopting nuclear power for Bitcoin mining, a strategy Pakistan could consider.
Khalil added that Pakistan’s electricity infrastructure faces deep-rooted structural issues. He cited El Salvador as an example, a Central American nation that declared Bitcoin legal tender but experienced minimal adoption and attractiveness for mining enterprises.
“Global digital mining firms and digital asset providers require abundant and inexpensive energy, a solid legal framework, and reliable internet. It is highly improbable that mining companies or AI server farms would select Pakistan solely based on the promotion of crypto,” he asserted.
Can Pakistan prevent armed groups from using cryptocurrencies?
The anonymity of digital assets has rendered them appealing to criminal and militant organizations.
Tehreek-e-Taliban Pakistan (TTP), a banned group that has been in conflict with the state since 2007, recently declared intentions to fundraise through cryptocurrencies, urging supporters to utilize Binance for donations.
The United Nations Security Council’s Counter-Terrorism Committee has raised alarms regarding groups like ISIS/ISIL, al-Qaeda, and others employing digital assets for financial support.
Mona Thakkar, a research fellow at the US-based International Centre for the Study of Violent Extremism, noted that TTP and its factions are increasingly adopting digital assets for fundraising, likely broadening their avenues for anonymously transferring funds.
“Beyond cryptocurrency, TTP’s latest crowdfunding strategies are also utilizing PayPal addresses. This indicates that TTP may be employing foreign-based financial intermediaries or supporters based in countries where PayPal operates, thereby evading regulatory scrutiny,” Thakkar remarked to Al Jazeera.
Thakkar, an expert in tracing militant financing networks, also pointed out that while armed groups may heavily rely on crypto donations for public fundraising, these cannot substitute for the long-standing hawala networks traditionally used to move funds across borders.
Hawala is an informal remittance method, operating outside conventional banking channels, based on mutual trust rather than physical cash movement.
“Cryptocurrency fundraising efforts complement these traditional remittance systems alongside various legal and illegal activities utilized by militants to accumulate funds. In reality, a growing trend in hawala transactions incorporates cryptocurrencies, offering new pathways for illicit actors to discreetly transfer assets,” she continued.
Thakkar mentioned that criminal organizations have devised intricate strategies to evade detection, such as leveraging decentralized platforms and privacy-focused currencies like Monero, often relying on informal exchanges.
Monero, boasting a market capitalization exceeding $3 billion, is currently the 28th largest cryptocurrency and prioritizes user privacy. Its primary characteristics render it virtually impossible to trace either the sender or the recipient, while also concealing the transaction volume.
“To counteract this, Pakistan’s financial institutions must impose strict regulations on centralized exchanges operating within the nation, such as Binance,” she insisted.
However, will Pakistan take such measures when the founder of Binance – who stepped down as CEO in 2023 – holds a significant influence over the country’s cryptocurrency policies?
Zaki Khalid, an open-source intelligence consultant from Rawalpindi, questioned if the government conducted comprehensive background checks before announcing Zhao’s appointment, describing the process as “unusual”.
“Zhao, Binance’s co-founder, faced implications and subsequent imprisonment on money laundering charges. Just last month, the banned TTP boasted of establishing their Binance wallet for donations, which could potentially be redirected for operational financing,” Khalid shared with Al Jazeera.
“The embrace of Zhao by the federal government suggests that essential due diligence regarding potential conflicts of interest may have been overlooked.”
