An increasing number of individuals and businesses across the world are turning to cryptocurrency for a range of investments and transactional and operational purposes. Pakistan is no exception. According to the 2021 Chainalysis Global Crypto Adoption Index, Pakistan ranks 3rd amongst the top ten countries with the highest number of crypto and bitcoin users.
While some endorse cryptocurrency capabilities to enable real-time, safe, and faster money transfers, others appreciate its decentralized nature and user autonomy. A low transaction fee, since there is no intermediary involved, is another prominent reason crypto has gained popularity.
In February, one of the country’s leading universities, the Lahore University of Management Sciences, received a grant worth $4.1 million to study the technology from Stacks, a blockchain network that connects Bitcoin to apps and smart contracts.
Waqar Zaka, a former TV host with more than a million followers on Youtube, has been lobbying officials for years to not only legalize the industry but have the government invest in it. Zaka, like Ahmed, had set up a cryptocurrency mining farm running on hydroelectric power.
Earlier this year, Khyber-Pakhtunkhwa’s provincial government tapped Zaka and Ahmed to be on a committee studying how it can profit from such ventures. In March, the group announced it was looking into setting up new mining farms using Zaka’s facility as a template.
The committee was dissolved in June, with the provincial government saying federal authorities should handle any new policies in cryptocurrencies.
One factor that has contributed to an increase in Bitcoin’s popularity in Pakistan is the country’s ongoing economic crisis. The Pakistani rupee has been facing significant devaluation against the US dollar, leading to an increase in inflation, which has negatively impacted the country’s economy. Due to these circumstances, some Pakistanis have turned to Bitcoin as an alternative investment option.
Another area where Bitcoin has shown potential in Pakistan is in cross-border transactions. The country has a considerable number of overseas workers who send remittances back home. Traditional money transfer services charge high fees, which can significantly eat into the recipient’s funds. Bitcoin, on the other hand, offers a faster, cheaper, and more secure option for sending money across borders.
Furthermore, Bitcoin’s underlying technology, blockchain, has the potential to revolutionize various sectors, including finance, healthcare, and logistics, among others. In Pakistan, we have seen the emergence of several blockchain-based startups that aim to disrupt traditional industry practices by leveraging this technology’s efficiency and transparency.
As identified by the Atlantic Council’s South Asia Center discussion, held on December 13, Pakistan witnessed a major hike in cryptocurrency investment during the pandemic, with total market capitalization surpassing $2 trillion last year.
According to a report by the Federation of Pakistan Chamber of Commerce and Industry, Pakistan’s main trade regulation body, the country recorded $20 billion of crypto value in the fiscal year 2020-2021, which was an unusual hike of 711%.
The federation also mentioned that cryptocurrencies thrived mostly during the pandemic times and the biggest crypto exchange that Pakistani investors were using was Binance, followed by other platforms like Localbitcoins.com and Binomo.
The report noted that 67% of crypto-investors in Pakistan are using centralized services, while just 33% are using decentralized financing platforms to make crypto-related transactions.
Pakistan-based social media groups explaining how to trade and mine cryptocurrency abound, some with tens of thousands of followers on Facebook. On YouTube, cryptocurrency videos in Urdu have been viewed hundreds of thousands of times.
Online cryptocurrency exchanges, most based outside Pakistan, like Localbitcoins.com, have hundreds of Pakistani traders listed, some with thousands of transactions.
Apps like Binance and Binomo, which track and trade cryptocurrency, have more downloads than some of the country’s largest banks’ apps, according to web analytics company SimilarWeb.
Bitcoin’s role in the financial system also extends to the unbanked or underbanked population. Many individuals across the globe lack access to traditional financial systems, which can limit their economic opportunities.
Bitcoin provides a new avenue for these individuals to access financial services, such as remittances, loans, and savings. Bitcoin’s decentralized nature means that anyone with an internet connection can participate in the network, irrespective of their geographical location.
In summary, Bitcoin’s role in the financial system is highly significant, and its benefits for finance are numerous. Bitcoin provides an alternative investment option, fast and convenient transactions, and access to financial services for the unbanked population. As Bitcoin’s adoption continues to grow, it will likely become an integral part of the financial system, providing new opportunities for investors and individuals alike.