Pros, Cons and How-To’s of Regulating Crypto-Currencies in Pakistan


Zong package. pk has demonstrated how just taxing cryptocurrencies in Pakistan can generate billions of rupees in revenue each year.

This should be reason enough for a cash-strapped country like Pakistan to begin the process of regulating the expanding crypto market. In actuality, there are even more reasons for Pakistan to regulate cryptocurrencies.

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Take a look at how Pakistanis are faring in cryptocurrency and the influence it has had on the country so doing to get a sense of where the public’s interest in the crypto market is.

The Numbers

Pakistan presently ranks third in the Central and Southern Asia region in terms of crypto adoption, according to Chainalysis, a research organization specializing in researching crypto-assets.

In fact, Pakistan is on par with India in terms of cryptocurrency acceptance, and might soon overtake India’s vast market if given the same legal protection as our Indian neighbors.

Pakistan is ranked third in Central and Southern Asia for cryptocurrency adoption.

If you’re curious about how Chainalysis rates markets, they consider the following three factors:

  • Value acquired on the blockchain, weighted by purchasing power parity per capita.
  • The volume of peer-to-peer trade is weighted by purchasing power parity per capita and internet users.

Weighted by purchasing power parity per capita, and retail value (from transfers under $10,000).

If you’re unfamiliar, P2P trade refers to cryptocurrency trading between individuals on various exchanges such as Binance. P2P trading involves a seller sending a crypto coin to a buyer in exchange for a local currency, which they exchange via bank accounts or cash.

P2P data is typically public and trackable by third parties.

Between July 20 and June 21, Pakistan received $18.6 billion in estimated value.

It is believed that about 2 million Pakistanis trade cryptocurrencies, based on traffic to various crypto exchanges and platforms (both on the web and apps).

The Potential

While 1 to 2 million people may appear to be a large amount, it is important to remember that this is only the beginning. Here are some facts regarding Pakistan’s internet population for context:

  • In January 2022, Pakistan’s total population was 227.3 million.
  • In May 2022, Pakistan had 193 million cellular mobile connections.
  • In May 2022, Pakistan had 113 million 3G/4G customers.
  • In January 2022, Pakistan had 71.70 million social media users.
  • At the start of 2022, 144.4 million people in Pakistan did not have access to the internet.
  • 16.35 Mbps is the average mobile internet connection speed via cellular networks.
  • In early 2022, Pakistan had 43.55 million Facebook users.
  • According to Google’s advertising data, YouTube has 71.70 million subscribers in Pakistan in early 2022.
  • According to data from Meta’s advertising tools, Instagram had 13.75 million users in Pakistan in early 2022.
  • According to data from ByteDance’s advertising resources, TikTok had 18.26 million users in Pakistan aged 18 and up in early 2022.

Consider where the userbase would be in three to five years if trading was permitted and consumers were allowed to buy cryptocurrency directly using their bank accounts, credit cards, or mobile wallets.

According to Rain Financial Inc., Pakistan’s crypto traders might reach 10 million by 2025, implying that the number of traders could increase by at least 5X in just three years.

Projected Crypto Users in Pakistan

With such a big userbase, it’s evident that it can’t be ignored and that it needs to be regulated to protect investors, and the general public, and generate billions in tax revenue. The number of crypto traders is expected to continue rising organically and at a slow pace, but it would be a huge error for the regulator to ignore the market.

Benefits of Regulating Crypto Currencies in Pakistan

While there are many advantages to regulating cryptocurrencies in Pakistan, some of the most significant ones are listed below, beginning with the much-needed tax revenue.

Taxes: Based on the current number of users and India’s flat rate (30 percent tax on crypto profits), Pakistan may make $200 million in tax revenue per year or Rs. 40 billion per year. If the market is regulated and everyone is allowed to trade in crypto, this figure will undoubtedly rise.

Background Checks: The government currently has no way of knowing who is trading cryptocurrency because of uncontrolled exchanges. As a result, there is no information on who earns how much and how they spend or trade cryptocurrency. This circumstance could lead to criminal activity and jeopardize national security.

Security: The government could acquire access to all cryptocurrency exchange transactions. By limiting the movement of unlawful money, transfers, or currency changing hands, and monitoring crypto exchanges, everything is traceable, down to a single bit of information that the authorities may want.

Economic Benefits: If regulated and widely embraced, blockchain technology and the cryptocurrency market can open up new business sectors and expand the fintech sector.

Faster and Cheaper Digital Settlements: Blockchain will result in faster, cheaper (or fully free), and even more secure digital settlements if it is widely adopted and used as a method of financial transfers (for now just of stable coins).

Save Millions in International Remittance Fees: Allowing international remittances via bitcoin could save Pakistan millions in banking fees and taxes. Last year, El Salvador, for example, saved more than $400 million in remittance fees.

Overseas Investments: If the government permits the establishment of exchanges and cryptocurrencies in the country, foreign investors may be eager to tap into the country’s population to invest and operate. These investments might be made in the power sector, blockchain-based enterprises, the crypto mining industry, or even some futuristic initiatives that could transform the country.


Financial Inclusion: In the face of crypto transactions, apps like EasyPaias and JazzCash will become a farce. The banking business will be redefined by zero fees, a 0-second latency, and unlimited free transactions with complete freedom.

To put it another way, legalizing cryptocurrency might usher Pakistan into a new financial era.

Consider the following scenario: Pakistan has a government- or private-sector-developed app for the Pakistani market that can serve as a wallet for the PKR digital currency (or cryptocurrency).

Consider paying bills with this coin, transferring money to one another, or receiving money from another country. All of this may happen in the blink of an eye.

Cons of Regulating Crypto Currencies in Pakistan

If I’m being honest, there’s only one disadvantage to regulating crypto in Pakistan: people may lose money during market crashes. The leveraged foreign exchange market and the stock exchange are examples of this.

People could lose billions of dollars in a crypto market crash, a crash of a specific token (LUNA, for example), or the 2018 crash, and this is a problem that may raise the regulator’s eyes.

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However, these accidents can happen to anyone (including those who are currently trading).

If millions of people utilize these crashes, billions of dollars in Pakistani money might end up in foreign hands. If someone loses money in crypto, someone else may profit, and those profiteers could be located outside Pakistan.

BluePrint of Regulating Crypto Currencies in Pakistan

The difficulty of regulating was reaffirmed in our discussions with crypto experts. The perfect regulations have yet to be developed because it is an uncharted area for the majority of governments.

However, there are several functioning models existing in developed nations that can be used with minimal modifications based on the local market to ensure that Pakistanis reap the greatest benefits from crypto and blockchain technologies.

At best, Pakistan can legalize crypto trading, begin taxing gains, and begin the process of creating and completing laws in the meantime.

In India, for example, while crypto rules are still being finalized, trading is permitted, and 30 percent of all gains are taxed. In addition, every transaction is subject to a 1% tax.

This essentially means that the government can raise much-needed cash while preparing to regulate the market, which could take months.

Things to be Noted

Pakistan, unlike other countries, is in desperate need of dollars and does not want the currency to leave the country. In light of this, Pakistan should bind trades for the following:

  • Exchanges must only enable funds to be transferred from PKR bank accounts to exchange and then back to the same PKR bank account (This will eliminate any chances of illicit fund transfer).
  • The transfer of funds from an exchange to a private wallet must be prohibited (to eliminate the chances of flight of dollars to a foreign land, money laundering, or any other illicit activity).
  • Transform exchanges into tax collectors, charging a tax on each transaction and/or any profits gained from that transaction.
  • Ensure that exchanges provide open access to any KYC, transaction details, or other trade, account, or other specifics.
  • Exchanges are also subject to local taxes.
  • Make having a local presence in the country a requirement for exchanges.
  • Make sure that exchanges only allow token trading after a thorough examination.
  • Make exchanges compensate for any data breaches, fund losses, or other damage caused by the exchange’s shortcomings.

Of course, all of this is contingent on exchanges being properly verified and licensed, which includes licensing costs and regulations comparable to those imposed on fintech businesses or even banks.

The government must ensure that exchanges and trading platforms are backed by real money and provide public insurance.

This could be the quickest way for a cash-strapped country like Pakistan to increase foreign exchange reserves and tax firms and dealers that are currently invisible to the tax system.

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Countries like El Salvador, as well as large economies like the United States, the United Kingdom, and India, have demonstrated how the crypto market may be linked to the local economy and promote economic activity in recent years.

Pakistan is losing prospective investments, and tax revenue, and failing to stem illicit financial transfers with each passing day. It is fair to argue that for Pakistan, time is of the essence.

A swift choice might pave the path for Pakistan to become home to the world’s largest crypto and blockchain enterprises in the future, whereas a slow or negative approach can stifle progress and worsen the economy.


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