Pakistan Adopting Blockchain is the First Step Towards Bitcoin Legalization

Pakistan’s Prime Minister Imran Khan recently called a meeting which was centered around digitizing the government administration through advancements in bitcoin and blockchain, and how it could help improve the efficiency, ensure transparency and improve service delivery.

For the meeting, a special team of experts in IT was called in from UAE who briefed the PM on how the government processes could be digitized. The conversation tapped into blockchain multiple times and how it could be leveraged to ensure full transparency of the government processes.

Apart from that, the topic of improving trade efficiency was also addressed which led to digitized solutions, ensuring better, faster and efficient results. Concerned with the economic hurdles of Pakistan, the prime minister was keen to eliminate the technology hurdles first. Acknowledging the fruits of digitization, PM Khan said:

The digitalization will also create much needed synergies among the government organizations for ensuring friction-less service delivery and improving ease of doing business in the country.

Pakistan had earlier banned cryptocurrencies and any mining activities which led to no nodes being run in Pakistan, a hurdle for the people to explore blockchain in general. In the past few weeks, Pakistan has been on the move with digitization and digital assets. Recently, it was announced that the government would be introducing Electronic Money Institutions (EMIs) regulations as suggested by the Financial Action Task Force (FATF). The main focus of the task force was to eliminate any acts of money laundering and any illicit crypto activities.

Furthermore, it was reported that Pakistan’s premier intelligence agency, ISI (Inter-Services Intelligence), had recommended the foreign minister of Pakistan to legalize bitcoin and other cryptocurrencies. This proposition included opening 5,000 crypto exchanges across Pakistan and to categorize crypto as an investment option subjected to capital gains tax. This would give Pakistan’s own stable coin, Pakcoin, which can be bought directly with Pakistani fiat currency, a way back into Pakistan’s crypto game, making crypto a means of payments. Pakcoin is an open source, global payment network that is fully decentralized without any central authorities. In its report the agency had stated:

Irrespective of the option GoP (Government of Pakistan) adopts, i.e., declaring crypto-currencies as legal or illegal, a robust oversight mechanism (mapping, investigation and prosecution) will have to be put in place as soon as possible.

During the time the Pakistani government was strictly against cryptocurrencies, there were still scams and illicit activities going on as a few people were still dealing in cryptos. Reportedly, 5,000 dealers and exchanges were still carrying out illegal trade using online payment systems in almost 100 cities and this number was increasing by 400% every year. Fearing the threat that cryptos could be used for money laundering, tax evasion, terror financing and other scams, many believe regulations have become necessary.

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In fact, in one of the recent scams the accused people claimed to be the dealers of Pakcoin and took millions of rupees from people with promises of huge returns. These scammers asked people to install an app on their phones which would increase their coins if they would shake their phones, making fun of a lot of investors. The distributors were later caught by Sar-e-Aam, a Pakistani TV show that exposes scams and frauds.

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In order to put a cap on these illicit activities, regulations seem to be a necessary step. Moreover, blockchain research and further exploration needs allowance for crypto mining setups and running nodes for the blockchains. This way, new use cases would be tapped and transparency would be ensured for this part of the subcontinent. Pakistan, where a lot of allegations and rumors regarding rigging in elections are spread, blockchain could easily find its way into the electoral process while similar use cases could be introduced in places where transparency is required.

Many people withing Pakistan’s financial structure believes that by incorporating blockchain at the government level, will pave the way for bitcoin adoption in the country. Further advancements include the introduction of cross-border remittance services using blockchain. Telenor, and Valyou’s joint venture for the cross-border payments, powered by AliPay, is another step towards creating a blockchain space, with many more to come, one can hope.

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