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Saturday, April 20, 2024

Formalization of crypto trading in Pakistan

Bitcoin and cryptocurrency mining were flourishing in Pakistan until April 2018 when the government banned trading and mining the virtual currencies

Rain Financial, a cryptocurrency trading platform based in Bahrain, is urging local officials to establish a legislative framework for the formalization of crypto trading in Pakistan.

Bitcoin and cryptocurrency mining were flourishing in Pakistan until April 2018 when the government banned trading and mining the virtual currencies. There is still a growing mining industry despite the fact that many mining farms have been shut down since this ban was implemented. Bitcoin mining pools like ViaBTC, Braiins and Slush Pool saw an increase in the number of people mining bitcoin and other crypto currencies at home because of the ban.

Read more: Pakistan’s foray into cryptocurrencies: Financial revolution or regulatory dilemma?

Rain Financial Country General Manager Zeeshan Ahmed told Dawn in a recent interview that trading in crypto assets — digital currencies in which transactions are verified and recorded by a decentralized system — is currently in a regulatory “no man’s land.”

“There’s no law that declares crypto illegal. Have the authorities frowned upon crypto? Yes. But issuing a statement is one thing and translating it into a law is another,” he said.

Dr. Reza Baqir, former governor State Bank of Pakistan (SBP) said in March the hazards of using cryptocurrency outweighed the benefits. Previously, the central bank issued an official notice warning the public to be cautious and avoid trading cryptocurrencies.

Read more: The Crypto Conundrum and Pakistan!

Mr. Zeeshan Ahmed said, expressed hope that the authorities will realize the advantages of formalizing an action that’s already in practice outside of the regulatory sphere.

According to data platform website Chainalysis, Pakistanis booked profits of more than $604 million in crypto trading during 2021. Pakistan is also among the top-ranking countries on the Global Crypto Adoption Index. This is despite the fact that the SBP doesn’t recognize cryptocurrencies as legal tender and, as such, hasn’t licensed any exchange to assist their trading.

Nonetheless, Pakistanis trade digital currency in peer-to-peer transactions on crypto exchanges such as Binance. The buyer then sends money to the seller within a short time frame and provides proof of payment to the trading site to obtain possession. Alternatively, a hundi/hawala channel can be used to buy or sell coins on a crypto exchange. Because of the unregulated trading structure, the government receives no tax on any capital gains booked by investors.

Mr. Zeeshan Ahmed explained the exchange is a major crypto trading platform in the markets it already operates in. The estimated volume of crypto trading in 2021 was close to $100 billion. “Our share was $2bn. A regional player currently, we’re poised to become a global one,” he said.

Crypto aficionados, including those utilizing advanced platforms, promote digital currencies as a secure medium of exchange, store of value, inflation hedge, and safe investment in the aftermath of a crash – characteristics that have conspicuously been missing from the 10,000-plus cryptocurrencies that currently exist.

Rain Financials’ bid to enter the Pakistani market couldn’t have come at a less opportune time. As much as $2 trillion has been wiped out of the combined market capitalization of cryptocurrencies over the last six months. The crash is so big that China’s Blockchain-based Service Network, a government-linked initiative to promote the commercial adoption of blockchain technology, has called cryptocurrencies the biggest Ponzi scheme in the history of humankind.

Mr. Ahmed stated that temporary setbacks should not be interpreted as the final verdict of history. In his opinion, the continued evolution of cryptocurrencies is as significant as the industrial revolution.

In short-term, this volatility seems to be excessive, but it is not. He said that worldwide crypto adoption rate is only 7 percent observing that volatility will come down in the long run.

Mr. Zeeshan Ahmed anticipates that whenever the regulators enable legal trading of cryptocurrencies, Pakistan will be a high-volume, low-transaction market for Rain Financial. So far, over 2 million Pakistanis have downloaded crypto exchange apps. He expects the figure to quadruple once the government grants legal protection to cryptocurrency.