Pakistan's government has hardened its stance against cryptocurrencies, even as retailers continue to hedge their financial bets against a devaluing Pakistani rupee partly due to a volatile political situation in the nation.
Cryptocurrencies will “never be legalized in Pakistan,” said Minister of State for Finance and Revenue Aisha Ghaus Pasha to the country's Senate Standing Committee on Finance on Wednesday, according to local reports.
The minister said that the Financial Action Task Force (FATF) had set a condition that cryptocurrency will not be legalized to keep it off the international finance watchdog's so-called "Grey List," according to one local news outlet, and another said Pakistan's stated position is because it goes against the conditions set by the FATF.
Pasha also reportedly said that the nation's central bank, the State Bank of Pakistan (SBP) and the Information Technology Ministry have been ordered to initiate work on banning cryptocurrencies. In Jan 2022, the SBP declared it planned to ban crypto, its first clear position on the new financial technology, CoinDesk reported.
Meanwhile, Banks in Pakistan have started informing customers that cryptocurrency trading is illegal, at least two sources told CoinDesk.
"As per regulatory instructions from the State Bank of Pakistan(SBP), any remittance of foreign exchange directly/indirectly outside Pakistan to overseas foreign exchange trading, margin trading, and CFD trading apps/websites/platforms through any payment channel is not allowed/permitted by SBP and such payments are inherently risky and illegal," said one message from a bank in Pakistan viewed by CoinDesk.
On April 30, 2023, Pakistan's Dawn newspaper reported that banks have formally warned customers against using debit or credit cards for crypto trading. But Dawn also said that cryptocurrencies are gaining increasing popularity in the nation with the annual trading volume for Pakistan-based wallets going up to $25 billion, up from $18 billion to $20 billion a year ago, according to Zeeshan Ahmed, country general manager at Rain Financial, a Gulf-based trading platform for cryptocurrencies.
This attempted ban comes at a time of political turmoil for Pakistan. Former Prime Minister Imran Khan, who was arrested last week after allegations of corruption and released just days ago after Pakistan's Supreme Court ruled the arrest unlawful, is in a "tense standoff" with police at his home in the city of Lahore.
Khan claims police want to arrest him again. The arrest has already led to massive protests in the country.
Pakistan's rupee slid 3.3% to an all-time low against the dollar of 300 per greenback last week, Bloomberg reported.
The political and financial instability has seen Pakistan retailers converting their salaries into stablecoins as a hedge, several sources told CoinDesk.
Ali Farid Khwaja, chairman of KTrade Securities and CEO of BlockTech Pakistan, told CoinDesk that people fear a sovereign default, particularly as the Pakistani government has not been able to secure International Monetary Fund support.
"I suspect that many people are buying USDT on crypto platforms as a way to get exposure to the US dollar," he said. "Even Bitcoin has performed well against the Pakistani Rupee. During the crypto run, reportedly more than 20 million Pakistanis had opened accounts on crypto platforms."
A blockchain investor, Bilal Bin Saqib, noted that the Pakistani rupee's value has fallen a "staggering" 57.4% against the dollar over the past year.
"For the majority of the population, stablecoins have emerged as the most convenient method to access the U.S. dollar, as the acquisition of physical dollars is hindered by import restrictions currently in place," he said.
CoinDesk has reached out to the FATF and exchanges like Binance and Kucoin for comment.