Cryptocurrency adoption and legalization has emerged to be one of the most critical issues that Pakistan’s economy has been facing recently. The Chainalysis’s 2025 Global Adoption Index argues that Pakistan experienced a rapid growing trend of interest in cryptocurrency adoption following India and the United States globally.
According to the Federation of Pakistan Chamber of Commerce and Industry, local residents hold approximately $20 billion in digital assets in year 2020-21. This figure has increased to $25 billion, comprising of 40 million operational crypto wallets. These remarkable figures are alarming rather than flattering especially for an economy where digital assets are penetrating without regulatory framework.
On the other side, the higher authorities consider it a success story. The Virtual Asset Ordinance 2025 has been passed. Alongside, Pakistan Crypto Council (PCC) has been established.
The real story behind the adoption is quite convincing. People shifted to unregulated digital assets because they don’t feel that the formal financial system provides attractive return on their investments. Consistent depreciation in PKR has led the people to look for alternative places to store value. The promise of decentralized system approach is unconvincing in parallel.
According to a recent research, more than half of the project revenues of digital assets flow through fiat-pegged tokens, which are mostly issued by centralized entities.
In this way, they are giving a way to technical and corporate centrally controlled mechanisms. Hence, the promise of decentralized system itself becomes questionable and acts as only a way to attract digitally illiterate investors.
The revolution of digital assets has also raised concerns about financial frauds. Most of the crypto transactions are being executed through informal channels such as hawala and hundi.
A report published by International Consortium of Investigative Journalists in 2025 revealed that digital assets worth billions of dollars have been converted to currency through shadow networking. It also reported that crypto with a same worth flowed from a Cambodian Institute Huione Group to the customer accounts operated under Binance. This was one of the major violations of anti- money laundering laws imposed by US.
In line with these concerns, we don’t need to look abroad for the crypto associated risks. The official figures of Pakistan revealed that approximately $600 million has been shifted abroad through crypto channels, bypassing the formal financial system. An economy with low foreign reserves and struggling to manage balance of payment positions can’t afford such huge illegal transfers.
Numerous human trafficking cases have also been reported, e.g., a trader of Karachi was kidnapped and reportedly $340,000 worth of Crypto was transferred from his exchange account. There are other similar cases also that indicate a predictable pattern.
Since these transfers are hard to trace and exist in an unregulated framework, they trigger violent crimes. Hence, human cost is also mounting, which is quite alarming and requires prompt attention of regulatory authorities.
Recently, Pakistan successfully remained off the FATF list. This achievement is genuine; however, to maintain this status, the country must bring virtual asset service providers under the umbrella of anti-money laundering supervision.
Special attention is required from the SBP to regulate the enormous volume of unlicensed crypto transactions. The crypto regulatory authority still has a lot to do in this regard. This regulatory gap creates a vulnerability similar to the one that previously led Pakistan to be grey-listed.
What actually happens when crypto markets are left unregulated? The answer lies in the catastrophic collapses around the globe.
In May 2021, the price of bitcoin experienced a sharp dip of 53% when China banned crypto mining. In May 2022, retail investors lost over $40 billion in Terra/Luna collapse. FTX exchange also collapsed in late 2022, causing the ordinary investors to face huge losses. These crashes are not exceptions; they are the norm.
Considering the vulnerability of Pakistan’s economy, which faces consistently high inflation, fiscal pressure, and a weak financial infrastructure, the country lacks the capacity to absorb further shocks. We have been facing an energy crisis for three decades; hence, using imported energy for crypto mining is highly questionable. This would expose the economy to a new bundle of risks rather than addressing its current economic and financial vulnerabilities.
We are at a crossroads: regulate or regret. A clear stance from the State Bank of Pakistan (SBP) on whether to adopt or leave cryptocurrency unregulated is urgently required. Banning and then attempting adoption creates confusion among stakeholders, which leads to the crowding out of investment.
The rules of the Financial Action Task Force (FATF) must be truly implemented to trace all crypto transactions. A clear mechanism for the licensing of exchanges, accountability, and dispute resolution is required.
Financial literacy must be improved to make the public aware of frauds, risks, and the absence of government guarantees in crypto transactions. In parallel, Pakistan currently lacks the institutional capacity to delve into a decentralized financial environment.
Nonetheless, Pakistan’s crypto underground economy has been operating in the shadows. The window to pull it into the light through robust regulation is closing fast before the ground shifts beneath our feet. Regulate or regret.
Copyright Business Recorder, 2026
The writer is an Associate Professor of Fintech at the Pakistan Institute of Development Economics (PIDE). He can be reached at Email: m.yasir@pide.org.pk