NOT too long ago, it was vast mineral deposits that were supposed to change the country’s economic fortunes. Now it’s cryptocurrency and crypto mining that are supposed to make the nation rich.
The government has already set up the Pakistan Crypto Council (PCC) in an attempt to fast-track the venture, though there is still no policy framework in place. Curiously, the inexplicable excitement about cryptocurrency seems to have been triggered by US President Donald Trump’s obsessive interest in the bitcoin business.
For the establishment-backed dispensation, the venture could provide an opportunity to attract foreign investment as well as help reset relations with the Trump administration.
Many analysts see a connection between the government’s enthusiasm for cryptocurrency and a shift in Washington’s policy in favour of Islamabad. The government not only plans to create its own ‘strategic reserves’ of cryptocurrency but also to provide incentives to those potentially investing in bitcoin mining.
Addressing a conference on bitcoin in Las Vegas last month, Bilal Bin Saqib, the newly appointed PCC head, unveiled an ambitious plan for the establishment of a national bitcoin wallet, holding “digital assets already in state custody”.
The conference, held in Las Vegas, was attended by US Vice-President JD Vance and Trump’s sons Eric Trump and Donald Trump Jr, who have a major interest in cryptocurrency. Bin Saqib has been touring the US seeking investment for Pakistan’s crypto market.
“Pakistan is no longer defined by its past. It is being reborn as a forward-looking hub of digital innovation — powered by its youth, sharpened by necessity, and led by a new generation of tech statesmen,” Bin Saqib told the conference.
He further stated that with over 40 million crypto wallets, Pakistan is one of the “largest and most active freelancer economies in the world”. He also thanked the US president for his peacemaking efforts in the recent India-Pakistan hostilities as well as his “commitment to crypto adoption”.
In the absence of a clear policy and economic framework, the crypto plan appears dubious.
Pakistan’s crypto head also said that the government had allocated 2,000 megawatts of surplus electricity on concessionary rates for bitcoin mining in its bid to encourage sovereign miners and tech firms.
According to the Finance Division, the ambitious initiative is part of a broader strategy to “monetise surplus electricity, create high-tech jobs, attract billions of dollars in foreign direct investment, and generate billions of dollars for the government”.
Notwithstanding these solemn pronouncements, there is still a huge disconnect between the government’s ambitious plan and the existing laws that do not recognise cryptocurrencies as legal tender.
That also raises questions about the legality of the government’s plan to use cryptocurrency to build a strategic reserve. More importantly, it’s not legal under the country’s financial crime laws to deal in crypto assets. The government should have done its homework before launching this ambitious project.
In the absence of a clear policy and economic framework, the crypto business plan becomes dubious. Then there is also the question of the potential of foreign investment in crypto mining, which requires a clear legal policy framework to protect investors. A major challenge for the PCC is to formulate a FATF-compliant regulatory framework for digital assets, launching bitcoin mining initiatives and overseeing blockchain integration.
Bitcoin, which was launched in 2009, is widely considered the first digital asset that is entirely based on speculative trading. This has led to conjecture regarding its potential use as a strategic reserve. Then there are also concerns about the government’s promise to provide power supply on competitive rates to crypto mining companies.
Pakistan would be competing with other countries, particularly the Gulf states, for foreign investment in the crypto business. Most analysts believe that it would not be possible for the government to supply power at a low rate compared to what is offered by other countries.
What seems to have excited our ruling establishment most is the reported interest of the Trump family in the crypto business. Since the American president’s return to power, his family’s crypto business has made massive amounts of money. His relentless promotion of the cryptocurrency business has also led to debate on the top office’s misuse of its authority.
After returning to the White House, Trump has eased oversight of the cryptocurrency industry, while he and his sons have fast-tracked crypto ventures that have reaped billions, profiting off investors including foreign ones. Such a move raises ethical and legal concerns.
According to media reports, the Trump family’s crypto venture, the World Liberty Financial (WLF), launched last year, has reached a $2bn investment deal with Binance, an Abu Dhabi financial fund in crypto exchange, which previously admitted to money laundering and other violations.
Two Trump scions played a key part in the deal that was announced at an Abu Dhabi crypto conference held two weeks before Trump’s visit last month to the UAE. It sparked allegations of improper foreign influence and ethics.
Similarly, in April, the PCC had announced a partnership with the WLF to “advance cryptocurrency applications and boost blockchain adoption” in Pakistan.
Trump’s zealous pursuit of crypto fortunes has been highlighted in a report by the watchdog group State Democracy Defenders Fund that estimates his crypto ventures as of mid-March at $2.9bn.
American Bitcoin, a crypto firm cofounded by Eric Trump, said that it has plans to go public — in an expansion of the Trump family’s investments across the crypto industry. Some analysts point out that Trump’s dealings in crypto is the biggest scandal, highlighting corruption and a conflict of interest.
In this situation, Pakistan needs to move more cautiously while opening up the crypto business. It would be perilous to expect investment from the Trump family holdings. The euphoria surrounding the cryptocurrency business is misplaced without a clear strategy and legal framework.
Published in: Dawn News
Link here: Crypto politics