Despite warnings from banks and the formal ban on crypto trading by the State Bank of Pakistan (SBP), cryptocurrencies are gaining popularity in Pakistan, with an estimated annual trading volume of $25 billion for Pakistan-based wallets, a significant increase from $18-20 billion last year, according to Zeeshan Ahmed, the country general manager at Rain Financial, a Gulf-based cryptocurrency trading platform.
Although the SBP does not recognize crypto assets and has advised the public against trading them, the estimate provided by Rain Financial indicates a 25-39 percent rise in the annual trading volume of digital assets in the past year alone. Additionally, the number of crypto wallets, which hold investors’ digital coins on public blockchain networks, has nearly doubled from 5-6 million a year ago to 9-10 million.
The exact extent of crypto trading in Pakistan is not officially reported, and the SBP has not responded to requests for comment. However, experts use a rough estimation of dividing the annual trading value by three to approximate the total crypto asset holdings, suggesting that Pakistan-based wallets may hold approximately $8.3 billion worth of crypto assets.
Despite the ban, people in Pakistan have found ways to buy and sell cryptocurrencies. One common method involves registering a wallet on a trading platform like Coinbase and having an overseas friend purchase and deposit assets on their behalf, while the buyer in Pakistan transfers the equivalent amount in rupees to the overseas friend’s local bank account. Local crypto traders who already own coins purchased through illegal remittance systems also facilitate transactions with hard cash. Additionally, person-to-person payments are used, where digital currency is received in a wallet and the money is transferred to the bank account of the local seller.
Efforts to persuade the SBP to recognize cryptocurrencies have not yet yielded concrete results, but stakeholders remain engaged in ongoing discussions. Some individuals, including a technology entrepreneur, have been in contact with global crypto exchanges like Coinbase and Binance to explore their potential entry into the Pakistani market. They propose the use of geo ring-fencing, which would ensure that crypto assets held in Pakistan-based wallets can only be sold to other Pakistan-based wallets, thereby addressing concerns about capital outflows.
Ejaz Ali Shah, the Managing Director of Pakistan Mercantile Exchange (PMEX), expressed interest in offering cash-settled futures contracts for cryptocurrencies once the SBP recognizes them as assets. The PMEX currently allows investors to trade various types of contracts, and Shah believes that introducing crypto futures contracts would be beneficial due to their cash-settled nature, which eliminates foreign exchange outflows. He suggested that the PMEX should follow the example of the Chicago Mercantile Exchange (CME), the largest futures exchange globally, which accepts crypto contracts.
Despite the ban and regulatory challenges, the increasing popularity of cryptocurrencies in Pakistan, along with discussions among stakeholders, indicates a growing interest in exploring the potential benefits and opportunities associated with digital assets in the country.