Turning Crypto Ambitions Into Realities

As countries worldwide accelerate their adoption of digital finance, the newly created Pakistan Crypto Council (PCC) is a bold attempt to position Pakistan within the blockchain revolution. Whilst the initiative shows the government’s awareness of crypto’s power to transform industries, beyond the fancy headlines and photo-ops, there are deeper challenges that will ultimately determine Pakistan’s success or stagnation in the global digital economy standings. Hence the Council’s roadmap and its alignment vis-a-vis Pakistan’s unique socio-economic landscape demand a thorough examination.

The PCC has been formed with the hope of giving Pakistan a body that can develop a regulatory framework for cryptocurrencies, oversee blockchain adoption and help position Pakistan as a regional hub for Web3 innovation. Key objectives that have been announced include:

Crafting policies to legitimise crypto trading, reduce fraud and align with the Financial Action Task Force’s (FATF) anti-money laundering (AML) guidelines.

Integrating blockchain into sectors like remittances, real estate and agriculture to enhance transparency and efficiency.

Leveraging Pakistan’s 20 million crypto users and young, tech-savvy population to attract global capital.

Despite these admirable goals, the PCC faces an uphill battle and a path to success that is riddled with complexities on multiple fronts.

For starters, the PCC, through no fault of its own, inherits a legacy of distrust owing to past regulatory flip-flops such as the State Bank of Pakistan’s (SBP) 2022 crypto ban. Hence, the Council must now reconcile its progressive vision with Pakistan’s bureaucratic inertia and institutional deficits. Along a similar trajectory, Changpeng Zhao’s appointment as a strategic advisor serves as a double-edged sword.

While Zhao’s expertise in scaling Binance, the world’s largest crypto exchange, is undisputed and there is no denying that having a heavyweight name such as his brings unparalleled technical expertise as well as global eyeballs to the work being done in Pakistan, his legal troubles may cast a shadow on how serious the PCC is about regulatory oversight. As reported by The Wall Street Journal in April 2024, Zhao resigned as Binance CEO after pleading guilty to US charges of violating anti-money laundering laws and was sentenced to four months in prison, which he has served. So far, the PCC has not publicly addressed these concerns, focusing instead on Zhao’s technical acumen.However, critics may argue that his appointment reflects a prioritisation of star power over governance accountability, which could be a misstep for a council tasked with building trust in a historically volatile sector. This trust is all the more important since Pakistan has perpetually walked the FATF tightrope. One misstep on this tightrope could have grave implications and therefore it is vital that governance accountability remains a paramount priority amongst the PCC members.

If the Council can get this right, and if it can have key stakeholders like the Securities and Exchange Commission of Pakistan and the SBP singing from the same hymn sheet – a task that in itself is no small feat given the SBP’s largely conservative outlook on cryptos in the past and how bureaucratic inter-institutional alignment can be in Pakistan – the PCC does stand at the precipice of changing how Pakistanis interact with money.

A low-hanging fruit is the remittance market that is ripe for a revolution. With over $30 billion remitted in 2024 according to the SBP, crypto adoption could slash transaction fees and processing times while simultaneously bringing transparency and accounting rigour via blockchain itself. The large freelancer segment – which in recent times has lost out to other Asian or African competitors who have more established payment facilities or better internet connectivity – would also largely welcome a solid means to remit funds from clients overseas.

Next, the opportunities presented by decentralised finance (DeFi) can also help empower the large unbanked population in Pakistan. Whilst it does require considerable investment in knowledge upskilling, the technology itself can offer ways to quickly scale day-to-day banking for both rural and urban populations alongside providing peer-to-peer lending and staking solutions. Tokenisation of state assets, which is also under consideration by the Council, can definitely help boost liquidity; albeit it would require robust auditing protocols to ensure no mismanagement of funds.

All said and done, the real challenge that will make or break the PCC will be whether it can find ways to counter the structural weaknesses that exist. Questions that should be keeping council members up at night are:l How does one solve the lack of internet penetration, which means that over 130 million people (i.e., >54% of the population as per analysis from DataReportal 2024) are still not using the internet?

How does one counter internet shutdowns? There’s no point in having aseamless crypto payment ecosystem that allows you to move moneyinstantly when you can’t use the service because the internet is shutor throttled.

How does one cater for cybersecurity? Pakistan has been plagued bycyberattacks, and cybersecurity remains an elusive yet vital piece ofthe puzzle.

How does one bring the legacy infrastructure into the new age? TheRaast payment network and traditional banking infrastructure requireinteroperability standards that have yet to be defined, let alone beany closer to implementation. For the ecosystem to work, thesestandards need to be cemented urgently.

How does one take local start-ups on the journey and make themadvocates rather than detractors? If Pakistan is to be at theforefront of the crypto revolution, then the brightest technicalminds need to be made to feel welcome alongside more traditionalfinance experts.

Who can one partner with and learn from globally to supercharge thePCC’s initiatives? For example, can one unlock the UAE-Pakistancrypto remittance corridor, knowing that the UAE is already at theforefront of crypto regulation in Asia?

In conclusion, the PCC’s success hinges on its ability to convert ambition into actionable, inclusive policies. Pakistan’s crypto revolution is not merely a financial overhaul but a cultural shift that needs to happen at all levels of society. By prioritising transparency, infrastructural development, and local as well as global collaboration, the PCC can position Pakistan as a bridge between emerging and established digital economies. Will Pakistan become a blockchain pioneer or a cautionary tale of unmet potential? The answer lies in the Council’s willingness to confront its challenges head-on – a task as daunting as it is transformative.

Jafer Ali Shariff is a financial services sector professional. He lives and works in London.