Bitcoin getting popular in Pakistan

MUHAMMAD ALI & RIZWAN BHATTI

KARACHI: Bitcoin, a cryptocurrency and worldwide payment system, is speedily getting popular in Pakistan particularly in Karachi to park tax-evaded or black money.

The local and international fund management companies and institutional investors termed Bitcoin volatile having no fundamentals that give other assets value but this mysterious peer-to-peer transactions system, which started trading at less than US$1,000 in early 2017, is presently floating over US$17000, magnetizing untaxed or black money as like other parts of the world from Pakistan.

Market insiders said that deposits and investments, which were pulled out from banking and real estate sectors after the promulgation of Benami account laws and the issuance of revised property valuations for capital gain tax, are now being poured in Bitcoin, due to low risk of being caught by local tax authorities and other relevant agencies as digital currencies are not recognized in banking sector and are being traded as commodities.

They said that people were buying Bitcoin against cash mostly through Hundi to launder or park their tax-evaded and black money outside Pakistan due to the decentralization of peer-to-peer online transactions and its anonymity and added that the trade volume of Bitcoin has increased 1000 times during last eight months.

No laws currently regulate the trade in Bitcoin.

There are reports that major traders of Bitcoin are employed in IT and telecom sectors and they facilitate investments in Bitcoin through unreported foreign bank accounts and Hundi, insiders revealed.

Astonishingly, the investors from Karachi’s biggest markets including Boltan Market, Jodia Bazar, Bohri Baazar, Kharadar Market and others are being educated about Bitcoin through Whatsapp groups.

However, the tax departments instead of taking Bitcoin as an opportunity to dig out potential taxpayers and revitalize its efforts towards broadening of tax base seems hesitant.

When contacted, tax officials from the Directorate Intelligence and Investigation-IR, Karachi and other tax departments appeared mystified and termed Bitcoin a myth, due to its physical non-existence.

They said that it is like a parallel banking system hence it comes under the jurisdictions of central bank and FIA; adding that it is intricate for tax departments to establish facts regarding money laundering in Bitcoin trading, due to lack of IT expertise.

Meanwhile, officials in cyber crime wing of Federal Investigation Agency (FIA) corroborated to have received complaints about Bitcoin, saying that agency doesn’t do much against the complaints, due to complex technicalities.

Bitcoin, which was invented by an unknown person or group of people under the name Satoshi Nakamoto in 2009, is the first decentralized digital currency, working without a central bank or single administrator. The transactions take place in Bitcoin between users directly through the use of cryptography without an intermediary, which are verified by network nodes and recorded in an immutable public distributed ledger called a blockchain. Bitcoin can be exchanged for other currencies, products and services and now thousands of merchants and vendors accept Bitcoin as payment. There are presently 2.9 to 5.8 million internet users that are enrolled in Bitcoin reported in the research produced by the University of Cambridge in 2017.