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LAHORE: Out of 154 countries, Pakistan ranks among top three countries in the world for cryptocurrency adoption in Central and Southern Asia with up to two million people directly associated with this business.

“As per estimates based on crypto trading platform traffic from Pakistan and the industry conversation numbers, there are about 0.5 million web traders and 1.5 (mobile) app traders, while the potential future market size is expected to hit 10 million traders by the end of 2025”, says RAIN Pakistan General Manager Zeeshan Ahmed during a roundtable discussion with the media here recently.

Also read: What Pakistan can learn as Dubai races to become cryptocurrency ‘hub’

RAIN is the first licenced crypto asset company in the Middle East and one of the key international players in the field.

According to Zeeshan, about 55 percent of the total crypto demand is originating from Punjab only while the country ranks eighth in terms of P2P (person-to-person) trading volume globally. As per a Chainalysis report, Pakistan received US 18.6 billion dollars between July 20 and June 21 last year mostly via unofficial channels, he added.

According to the report, Pakistan received $ 74.4 million through illegal channels and a large chunk of it was received under the heads of child abuse material scams, darknet market, stolen funds, fraud shop and ransom ware, he pointed out.

“At present, Pakistan is in dire need of foreign reserves, but still losing billions of dollars due to the absence of a regulated regime and legal framework,” he said, adding the sooner this business is regulated, the better for the country and investors because no government can stop crypto in future.

Considering the crypto’s inevitable future, he said that even in India formulation of regulations have been started and the crypto exchange companies are getting themselves registered with a tax collection authority. He said India has imposed a 31 percent capital gains tax on income generating from crypto.

Cryptocurrencies in Pakistan: looking for a balance

To a query, Zeeshan said that lack of awareness and capacity buildings of the government functionaries are apparently one of the major impediments to regulating this sector. To another query, RAIN Senior Marketing Manager Shahryar Khalid said almost all the mobile applications currently operational in Pakistan are offering P2P platform to its clients, instead of offering coins purchase from the app, due to which frauds occur as were seen in the recent past.

About the crypto landscape of Pakistan, he said that around two million people have expressed their interest in or liked Facebook pages related to Bitcoin, cryptocurrency, Ethereum and digital currencies.

In addition, two million Google searches per month from Pakistan are related to cryptocurrencies.

“Most of the queries were related to global crypto brands, information specific queries, trading platform queries and action specific queries”, he reveled.

Speaking on the sidelines of the discussion, RAIN Director Public Policy Aatiqa Lateef said they were in talks with the concerned stakeholders, including the State Bank of Pakistan (SBP), Securities & Exchange Commission of Pakistan (SECP), Pakistan Telecommunication Authority (PTA), Federal Board of Revenue (FBR) and the Finance Division to formulate a federal legal framework in line with the Financial Action Task Force’s (FATF) guidelines to regulate the digital space and prevent potential frauds and money laundering.

‘Legalising crypto trade to bring Rs20bn in taxes’

To a query, she said the legal status of cryptocurrency and crypto assets in Pakistan is still ‘vague’ as a panel, formed by the Sindh High Court (SHC) earlier this year, had proposed a complete ban on such types of assets and currencies.

“However in March, we sat together with all the stakeholders, who unanimously decided, in principle, to devise a legal framework in this regard after ‘due-diligence’,” she said, adding that the role of SBP seemed quite serious as compared to other stakeholders.

When asked about the legal status of some popular mobile apps currently running in Pakistan, she said all the crypto related apps are “unregulated” and when they wrote to the government after some alleged frauds were reported by the media, the relevant agencies started arresting citizens instead of shutting down the apps.

Responding to another query, she said that banks are often unwilling to collaborate with crypto platforms over AML/CFT concerns and for fear of backlash from regulators.

According to her, the governments could alleviate these concerns through a robust AML/CFT framework that meets FATF requirements and through circulars and no objection letters highlighting the licensing status of crypto exchange platforms.

“Partnerships between banks and crypto exchanges can expedite money transfer processes, boost investor confidence, attract investments, and tap into a larger customer base. With a robust crypto regulatory regime, bank support for duly licensed crypto entities is beneficial for both parties and conducive for the growth of the financial services sector”, she suggested.

She added that limitations on the types of crypto assets that exchanges are permitted to handle are extraneous when sufficient information is disclosed about these cryptocurrencies and due-diligence has been carried out to verify the legitimacy of the offerings based on FATF guidelines pertaining to know your transactions (KYT) and AML/CFT standards.

“Exchange company mechanisms can ensure all account withdrawals from the exchange which are restricted to those initially being deposited from Pakistani bank accounts in PKR”, she said, adding that each and any transaction moving in and out of the country in the form of crypto transfers can also be tracked and the exchange retains complete oversight on all movement of funds.

Copyright Business Recorder, 2022

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