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Hindustan Times
19-05-2025
- Business
- Hindustan Times
Crypto Utility is Driving Financial Inclusion in Emerging Markets
Although institutional adoption remains on the rise, in major economies such as the United States, cryptocurrencies continue to be viewed as a highly speculative asset class. However, in the world's emerging markets, adoption of cryptocurrency has been driven more strongly by necessity rather than speculative frenzy. Blockchain technology has been a game-changer for the world's underbanked, who prior to the emergence of the Web3 economy, were underserved by the traditional financial system. With this, it's no surprise that the countries most rapidly adopting cryptocurrencies for everyday use are primarily those in the developing world. Crypto industry leaders like Binance have been investing heavily in solving the globally unbanked problem for several years. After re-entering the Indian cryptocurrency market last year, Binance is in the process of entering other emerging markets where cryptocurrency use is on the rise and there's a significant need for financial services. In a recent fireside chat at the Token2049 conference, Binance CEO Richard Teng explained his vision for global financial meritocracy, 'At Binance, we're breaking barriers to empower the 1.7 billion unbanked worldwide through intuitive tools, regulatory collaboration, and open access. Financial freedom shouldn't be a privilege.' If other such institutions and investors follow suit, it could create an outcome that both produces positive financial returns, while at the same time fostering a continued increase in financial inclusion. In the United States, cryptocurrencies have entered the financial mainstream over the past year. The launch of products like spot Bitcoin exchange-traded funds (ETFs) have led to an inflow of institutional and retail capital into this asset class. However, when it comes to adoption of crypto outside the U.S. and other developed economies, the focus is less about investment, and more about functional use. For one, in emerging markets, cryptocurrencies have emerged as a solution to a longstanding problem: limited access to banking. Per the World Bank, around 1.7 billion of the world's population remains unbanked, or without access to essential banking services. But while this figure remains astonishingly high, rising access to crypto-based alternatives to traditional personal and business banking products has helped to mitigate this issue. It's no coincidence that Indonesia, Nigeria, the Philippines and Vietnam, four of the top ten countries on the Global Crypto Adoption Index, are also some of the most underbanked countries in the world. That's not all. Through crypto stablecoins like USDT, those in emerging markets now have access to both a hedge against local hyperinflation, as well as a faster and less expense means to conduct cross-border transactions. Since 2024, there's been increased discussion regarding 'regulatory clarity,' or the implementation of regulatory frameworks that enable the blockchain economy to integrate fully with the mainstream financial system. Yet while much of this 'regulatory clarity' talk has been about recent and anticipated future changes in U.S. cryptocurrency regulations, it should be noted that 'regulatory clarity' is indeed a global phenomenon. Per a recent study from the Atlantic Council of 60 countries, including both those with advanced as well as emerging market economies, 70% of them are currently making substantial changes to their regulatory framework. As these changes are by-and-large accommodative to industry growth, standardization of crypto regulation worldwide stands to further open up access and availability to crypto-based financial services in emerging markets. The high amount of underbanked and unbanked populations in these markets points to strong demand for crypto-related services. But while some forward-thinking institutions have started to take notice, awareness of this fact is still far from widespread. As a result, it may be underinvestment, not a lack of demand or 'regulatory clarity,' that is limiting crypto's potential to increase financial inclusion. Crypto and blockchain venture capital (VC) investment continues to skew heavily towards startups based in the United States and other advanced economies. In emerging markets, crypto-based startups face greater challenges securing growth capital. Again, while some firms have started to see the opportunity here, greater awareness, and in turn greater investment, is likely necessary for this trend to continue, if not accelerate in pace. While there may be hesitancy among mainstream venture capital investors to invest in emerging markets, due to various jurisdictional-related risks, high demand for such services may provide sufficient potential reward to outweigh these risks. If VC firms and other investors increase their focus on emerging market startups, it may just well produce a 'win-win' scenario for both parties. Investments in emerging market crypto ventures could experience rapid growth, thanks to a high potential customer base of underbanked and unbanked customers. The underbanked and unbanked, in turn, stand to benefit from increased financial inclusion, including greater access to the global market, which could help drive economic growth in their respective countries. Readers are advised that Crypto products and NFTs are unregulated and involve significant risks. There may be no regulatory recourse for losses arising from such transactions. Hindustan Times/HTDS shall not, in any manner, be responsible or liable for the content of the article, advertisement, including the views, opinions, announcements, declarations, or affirmations expressed therein and is absolved from any legal action or enforceable claims. This content is for informational and awareness purposes only and does not constitute financial advice. Want to get your story featured as above? click here!
Finextra
05-05-2025
- Business
- Finextra
Increasing role of cryptocurrencies in Sub-Saharan Africa: By Carlo R.W. De Meijer
Recently a growing number of blogs and articles have been published focussing on the increased adoption of blockchain technology and cryptocurrencies in Africa especially in Sub Saharan Africa. According to these reports Africa is the fastest-growing cryptocurrency market among developing economies This is driven by crypto friendly regulation in a number of African countries, dynamic demographics, rapid mobile phone penetration, and an ongoing push for financial inclusion. From cross-border remittances to digital identity management, blockchain-powered solutions are beginning to reshape industries and empower communities across the African continent. This blog outlines the rapidly increasing role of cryptocurrencies in sub-Saharan Africa and the drivers behind this development. It explores the opportunities, but above all the remaining challenges and solutions for a growing acceptance of cryptocurrency and blockchain technology in Africa. Cryptocurrency adoption in Africa: present state The adoption of cryptocurrency across African countries has experienced remarkable growth in recent years, driven by the combination of various socio-economic factors, unique economic challenges and technological innovation. According to a report from Consensys (2024) cryptocurrency adoption in Sub-Saharan Africa received an estimated $125 billion in on-chain value in 2024. Africa accounted for over 5% of global cryptocurrency transaction volume. Countries like Nigeria and South Africa are leading the way in trading volumes, peer-to-peer transactions, and blockchain-based solutions. These countries are benefiting from progressive regulatory efforts and high engagement levels, resulting in rapid adoption of crypto as a complement to traditional finance systems. Nigeria ranks second globally on the Global Crypto Adoption Index, receiving approximately US$59 billion in cryptocurrency value from July 2023 to June 2024, while also Kenya (21st), Ghana (29th) and South Africa (31th) boast vibrant adoption. The continent as a whole accounted for only 2,7 percent of global on-chain transaction volume during that period, reflecting infrastructure and regulatory deficiencies. Key Socio-economic and innovation drivers Africa is emerging as a key region for crypto, driven by socio-economic factors such as high inflation, limited access to traditional banking, and the high cost of cross-border remittances, but also innovative drivers including high mobile penetration, and a young, tech-savvy population are driving this adoption. Socio-economic drivers Key socio-economic drivers of this growing crypto adoption are the financial instability caused by high inflation and currency depreciation in many African countries. But also the high costs of cross-border remittances as well as the limited access to traditional banking for a significant portion of Africa's population. - Financial instability: high inflation and currency devaluation A key driver of this growing crypto adoption is the use of cryptocurrencies as a more stable store of value and as a hedge against inflation and economic instability. Where you've really seen an explosion of crypto adoption is in places that have hyper-inflationary currencies. This is exactly one of the reasons why crypto has found its feet in countries like Zimbabwe and Ghana. - Remittances: high transaction fees and limited access to foreign currency Cryptocurrency has also become an increasingly popular tool for cross-border transactions and remittances. Remittances play a critical role in many African economies, often contributing a significant portion of GDP. With millions of Africans living abroad, sending money back home can often be costly and time-consuming, with high transaction fees from conventional money transfer services and limited access to foreign currency. - Unbanked and underserved: limited access to traditional banking Another pressing concern is the limited access to traditional financial services. A significant portion of Africa's population including SME's remains unbanked. According to the World Bank, approximately 66% of sub-Saharan Africans do not have a bank account, which presents numerous challenges for individuals and small businesses alike. The unbanked population is particularly vulnerable to economic shocks and lacks the financial instruments necessary to build wealth or safeguard against crises. As traditional banking remains out of reach for many, cryptocurrencies slowly beginning to take a share of African wallets. This surge is influenced by the pressing need for financial inclusion, especially in regions where traditional banking infrastructure is lacking. Innovative Drivers Africa, in particular Sub-Saharan Africa, has emerged as a frontier for cryptocurrency adoption, driven by growing technological adoption such as the internet, and a more widespread use of mobile money platforms via smart phones, that enables seamless access to digital wallets and crypto-based financial services. But also by the growing young tech-savvy population that is eager to explore blockchain technology. - Mobile devices: Growing Mobile Adoption Africa leads the world in mobile money adoption, establishing a critical foundation for digital financial tools. Roughly three-fourths of African online traffic occurs via mobile phones. The proliferation of smartphones and the internet has enabled more individuals to access digital currencies. This familiarity with mobile-based transactions makes it easier for users to transition to cryptocurrency wallets and exchanges, especially in countries where traditional banking infrastructure remains underdeveloped. The advantage of this technology is that it is peer-to-peer. It doesn't need a bank or intermediaries. - Young, Tech-Savvy Population Africa's greatest asset in the crypto revolution is its youth. High smartphone penetration and social media engagement foster a culture where young people are eager to explore novel solutions. Thereby cryptocurrency is increasingly seen as an accessible avenue for investing, saving, and conducting daily transactions. Cryptocurrency use cases The unique challenges faced by African economies, such as high inflation, financial inclusivity and a lack of trust in traditional banking systems, have created fertile ground for these technologies to flourish. The advent of cryptocurrency and blockchain technology offers a promising alternative that can help tackle numerous socio-economic and technical challenges. These digital solutions can facilitate transactions efficiently, without the traditional barriers posed by established financial institutions. - Attractive investment avenue With economic volatility in several countries, cryptocurrencies present an attractive investment avenue. These investment opportunities have prompted many Africans to turn to cryptocurrencies for wealth generation. Especially in Ghana and Nigeria, where young investors are increasingly allocating funds to Bitcoin and other digital assets, thus actively participating in what they perceive as a financial revolution. In Nigeria, stablecoins make up about 40 percent of all stablecoin inflows in Sub-Saharan Africa - Hedge against inflation Cryptocurrency has particularly practical use cases in Africa, where it is increasingly used for business payments, as a hedge against inflation, and for more frequent, smaller retail-sized transfers. With traditional banking restrictions and currency volatility, cryptocurrencies esp. stablecoins are emerging as a secure and cost-effective alternative for savings and remittances. In the world's most inflation-riddled African nations, digital assets like Bitcoin and stablecoins provide a way to store value in a currency less susceptible to inflationary pressures, thereby preserving purchasing power in a way that traditional currencies cannot. They provide liquidity and accessibility in markets where fiat transactions are cumbersome or expensive - Fostering financial inclusion The unique features of blockchain technology also enable direct peer-to-peer interactions, fostering financial inclusion in areas where banking services are scarce. DeFi platforms, and peer-to-peer payment systems are offering viable, secure and cost-effective alternatives to traditional banking, particularly for Africa's unbanked and underbanked populations, promoting economic stability within communities The introduction of decentralized finance (DeFi) platforms has enabled unbanked populations to access financial services, such as loans and savings accounts, without the high collateral requirements of traditional banks. By eliminating intermediaries and reducing transaction costs, DeFi can offer more inclusive and transparent financial solutions. - Alternative to traditional remittance channels Cryptocurrencies also make it easier to do cross-border transactions and send money home. This efficiency has attracted migrants looking for more convenient and less expensive money transfer methods. Stablecoins, especially those pegged to the US dollar, have become essential for cross-border payments, offering a cost-effective and reliable alternative to traditional remittance channels. For families reliant on remittances, cryptocurrencies offer a faster and cheaper alternative for cross-border transfers. They could reduce transaction costs to under 2 percent and settle transfers in minutes. As a top recipient of remittances within Africa, with over 3 million Ghanaians living abroad, Ghana has seen growing interest in cryptocurrencies as a cheaper, faster alternative to traditional banking channels. But also countries like Nigeria and Kenya have seen a rise in local cryptocurrency platforms that facilitate these transactions, allowing users to send money swiftly and at lower costs. Potential applications of blockchain technology Next to cryptocurrencies, the potential applications of blockchain technology in Africa are vast and varied, promising to address critical socio-economic issues. The number of applications include secure land and property registries, agricultural supply chain transparency, identity and financial inclusion and enhanced democratic processes through trustworthy voting systems.- Land and Property Registries Blockchain technology holds significant promise for revolutionizing land registration and property ownership processes across African nations. In many regions, land ownership disputes are common, primarily due to inadequate record-keeping and overlapping claims. Implementing a blockchain-based land registry can provide a secure, tamper-proof method for recording property transactions and ownership, thereby reducing conflicts and increasing access to secure titles. By integrating smart contracts, governments can streamline land titling processes and minimize fraudulent transactions. This not only empowers individuals with greater security over their land but also opens avenues for leveraging real estate as collateral for loans, promoting economic growth. - Supply Chain management in Agriculture Another prominent application of blockchain technology in Africa is supply chain management in the agricultural sector. The continent's agricultural sector, which is fundamental to its economy, often grapples with inefficiencies and lack of transparency. Smallholder farmers can benefit from blockchain solutions that provide transparent and traceable supply chains. By utilizing blockchain, stakeholders can create immutable records of transactions, enabling farmers, distributors, and retailers to track the provenance of goods ensuring quality control, reduce waste, and optimize logistics. - Identity and Financial Inclusion Moreover, financial inclusion has also seen significant strides through blockchain technology such as in Nigeria. A lack of formal identity documentation hinders many Africans from accessing essential services, including banking and healthcare. Blockchain-based digital identity platforms can offer secure, verifiable credentials that give individuals control over their data, enabling them to access financial services, insurance, and government assistance more easily. This shift is particularly advantageous for small businesses and entrepreneurs who often face barriers in accessing capital. - Enhancing democratic processes Blockchain technology can also play a crucial role in enhancing democratic processes through secure voting systems. Many African countries experience challenges concerning electoral fraud and lack of transparency in the voting process. By introducing a blockchain-based voting platform, citizens can cast their votes with confidence, knowing that their choices are securely recorded and that the results are verifiable. This can lead to increased voter turnout and more legitimate governance, fostering political stability and social cohesion. Critical challenges Despite its rapid growth there are still a number of critical challenges facing cryptocurrency and blockchain adoption in Africa, that may restrain the digital currency's growth aspirations. Several barriers remain, including regulatory uncertainty, infrastructure and technology capability limitations, volatility and security risks, limited local liquidity and the knowledge gap and lack of educational resources. - Regulatory Uncertainty: mixed regulatory environment One of the main challenges is the mixed regulatory environment. The landscape of cryptocurrency and blockchain technology in Africa is shaped significantly by the regulatory responses of various governments. The regulatory environment for blockchain and crypto in Africa however is divers and varies across the continent. According to an IMF survey only about 25% of Sub-Saharan African countries formally regulate cryptocurrencies. African countries, including South Africa, and Nigeria, have embraced blockchain and crypto and already have pioneered formal regulatory regimes for virtual assets, that support the proliferation of digital currencies while ensuring consumer protection. Other countries such as Ghana and Kenya are actively working towards formalizing their regulatory approaches, indicating a promising direction for the future of cryptocurrency in the region. In contrast, 6 nations including Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania and the Republic of Congo, have opted for a more cautious approach and imposed outright bans on cryptocurrency transactions due to concerns over fraud, the potential for money laundering and financial instability. This situation is exposing business and investors to policy uncertainty and enforcement gaps, stifling domestic innovation, pushing liquidity offshore to unregulated exchanges, and exposing African crypto participants to legal and financial risk. - Infrastructure limitations Another critical risk are the technological and infrastructural barriers that exist in many parts of Africa. Reliable internet connectivity, stable power supply, and digital literacy remain significant hurdles. These resources are still unevenly distributed across Africa. Nearly 60 million people in Sub-Saharan Africa lacked electricity in 2023 and rural electrification rates remain below 30% in many countries. Just 43 percent of Sub-Saharan Africans have internet connectivity, leaving a 50 percent usage gap, while roughly 55% of the population own smart phones. Tis lack of infrastructure for supporting digital transactions poses a significant challenge to creating a seamless user experience, reinforcing reliance on informal, peer to peer channels. Limited access to reliable internet and electricity can hamper the widespread adoption of cryptocurrencies and blockchain applications, particularly in rural areas where connectivity and electricity grids are inconsistent. - Security Risks Moreover, security remains a pressing concern, The trends and obstacles shaping Africa's rapidly evolving cryptocurrency landscape, highlights security issues, that could create apprehension among potential users and investors. Crypto's volatility and the prevalence of fraudulent schemes, highlighting how unregulated markets become fertile ground for sophisticated fraud. The absence of formal oversight in many African countries fuels illicit finance concerns, unlicensed platforms and peer-to-peer channels operate beyond the reach of AML/CFT controls, eroding trust and exposing retail users to fraud and market manipulation. With increasing reports of scams and hacking incidents targeting cryptocurrency platforms, African crypto users and businesses are focusing on better more robust security protocols to protect digital assets. - Lack of educational resources And there is the knowledge gap. A significant portion of the Sub-Saharan African population lacks the knowledge to fully utilise cryptocurrencies. There is however also a lack of educational resources about cryptocurrencies. This underscores the importance of public-private collaboration, calling on regulators, innovators, and financial institutions to bridge the knowledge gap and implement best practices for blockchain governance. The growing community of cryptocurrency enthusiasts is working diligently to address these issues, fostering awareness and paving the way for a more integrated digital economy across Africa. How to combat these challenges? These challenges may threat blockchain and crypto adoption. As a result of these challenges foreign platforms are taken their place. Binance, the world largest exchange, commands a dominant 52-72% share of African crypto-exchange users. They also drive talent offshore, stunting the continent's ability to compete in the rapidly evolving global digital-finance landscape. Regulatory uncertainty and the lack of licensed stablecoin corridors force diasporians into expensive informal channels or mobile money intermediaries. To prevent that pan-African cooperation on various activities are urgently needed. It requires a unified, multi-pillar strategy that enshrines clear crypto-asset regulation, harmonizing licensing across regional blogs, invest in digital and energy infrastructure and builds human-capital through targeted education and regulatory training. Roadmap towards Pan-African regulation - Harmonized regulation Urgently needed is a roadmap for harmonized regulation and infrastructure development that can unlock the full promise of digital currencies across Africa. This requires institutional coordination for the African Union down to national regulators. African governments and central banks must act swiftly to establish interim frameworks that bring digital-asset activities in the light of regulation. To unlock the African continent's full potential of blockchain technology and crypto acceptance, enhancing financial inclusion, catalyse youth entrepreneurship and integrate its economies into the global digital asset system is urgently needed. Effective crypto regulation hinges on robust cybersecurity and device access. African governments should swiftly define, license and supervise digital-asset activities. - Harmonise licensing frameworks To create a clear legal environment for digital asset markets, African policymakers should adopt harmonize licensing frameworks, streamlining licensing for Virtual Asset Service Providers (VASPs). They therefor should adopt a model crypto-asset bill that defines token categories, licensable activities and enforceable smart-contract provisions. This framework must embed risk-based AML/CFT measures and comprehensive consumer-protection safeguards. Africa's fragmented licensing landscape can be transcended through a Pan-African Crypto Passport (modelled on the EU's MICA) in which a single authorisation from one jurisdiction grants cross-border service rights in all subscribing states. - Regulatory sandboxes Another step to be taken is expanding regulatory sandboxes across these blocs. This will enable innovators to pilot solutions under standardised conditions. Adaptive regulation via sandboxes and multi-stakeholder forums can balance innovation with consumer safety. As of late 2024, at least 15 African countries operated fintech sandboxes, with several countries, including Ghana, Nigeria, South Africa, Kenya and Mauritius, explicitly admitting crypto and blockchain pilots. Implementing crypto councils at country level would bring together central banks, securities regulators, telecom operators, blockchain-analytics firms, and civil-society groups to co-create regulation, overseen sandboxes and monitor market integrity. - Pan African crypto rail Africa could also develop a dedicated blockchain-based crypto rail. This architecture would layer tokenized-asset settlement atop the Pan-African Payment and Settlement System's (PAPSS's) net-settlement engine, allowing regulated stablecoins and tokenized securities to clear continent-wide in minutes. In leveraging ISO 20022 interoperability standards and open-source smart contract libraries, the rail would ensure that digital-asset transactions benefit from both the security of permissioned networks and the efficiency of decentralised validation. African policymakers and National-ID and payment settlement platforms will lay the technical foundations for interoperable crypto rails. When combined with collaborative sandboxes and public-private crypto councils, these measures can ensure that regulation evolves in step with innovation. - Digital Infrastructure investment Robust digital-asset ecosystems require connectivity, reliable power and device access all over the place via trusted digital-ID systems. Governments should prioritize broadband expansion and promote affordable mobile internet services, addressing the 60 percent usage gap in Sub-Saharan Africa. Parallel investments in digital-ID platforms should underpin secure e-KYC processes for crypto account opening. Regulators should leverage these digital ID-platforms to enforce risk-based diligence, transaction monitoring and cross border AML/CFT information sharing, - Education and skills development Sustainable growth of Africa's crypto economy hinges on a pipeline of skilled professionals. Bridging the skills gap is thereby essential for effective supervision and market development. Leading universities have begun integrating blockchain into their curricula, thereby collaborating with industry hackathons to give students real-world exposure. Pan-African initiatives such as the African Blockchain Institute offer standardised, expert-led training and research. Governments and the African Union should further incentivize such programs through scholarships, accreditation, frameworks and public-private grants. Forward thinking: holding significant promise for the African continent. The African continent is increasingly harnessing blockchain technology and digital assets to accelerate financial inclusion, empower its youth and integrate its economics more deeply into the digital financial ecosystem. Such a blockchain and crypto infrastructure can streamline essential services, fuelling innovation, maximise financial inclusion, enhance regulatory efficiency and drive economic growth. As regulations evolve, security strengthens, and more use cases emerge, digital currencies may play a transformative role in Africa's financial landscape, particularly in remittances and digital payments. In conclusion, despite the challenges, the opportunities presented by cryptocurrency and blockchain technology represent a powerful engine for progress, holding significant promise for the Africa continent's future.
Express Tribune
02-03-2025
- Business
- Express Tribune
Is it time Pakistan cashed in on crypto?
At the inaugural Pakistan Banking Summit 2025, Finance Minister Muhammad Aurangzeb emphasised the critical need to modernise Pakistan's banking infrastructure through comprehensive digitisation. A particularly noteworthy aspect of his address was the appeal to authorities, especially the State Bank of Pakistan (SBP), to cultivate a progressive and adaptable stance towards cryptocurrency. In light of Pakistan's historically strict laws governing digital assets, this proclamation represents a substantial shift. This change in viewpoint is especially relevant now that Pakistan is becoming a global leader in the usage of cryptocurrencies. With an estimated 20 million active participants in the cryptocurrency market, Pakistan stands at a crossroads: it can either embrace this evolving financial landscape or risk falling behind as global adoption accelerates. The current state in Pakistan Despite the historically cautious position of the State Bank of Pakistan (SBP) regarding cryptocurrencies, adoption rates have surged in recent years. In 2020-21 alone, cryptocurrency transactions in Pakistan reached an estimated US$20 billion, representing an unprecedented 711% increase. This dramatic growth propelled Pakistan to third place in the 2021 Global Crypto Adoption Index, surpassed only by Vietnam and India. It's important to note that the SBP currently prohibits entities under its regulatory purview, including banks and financial institutions, from engaging in virtual currency dealings. Several factors contribute to this widespread adoption. Pakistan has a young, digitally savvy population that views cryptocurrency as both a global economic gateway and a hedge against inflation. A KuCoin report from June 2023 indicated that 17% of Pakistani Internet users aged 18-60 identify as cryptocurrency investors. Furthermore, the expanding prevalence of mobile wallets and user-friendly online payment platforms has created fertile ground for the organic proliferation of digital currencies. It is crucial to recognise the diverse motivations and profiles of cryptocurrency investors in Pakistan. While some actively engage in trading established cryptocurrencies like Bitcoin and Ethereum, a significant segment utilises stablecoins, such as Tether (USDT), as a reliable store of value, especially in the face of prevailing economic uncertainties and fluctuations in dollar availability. Lessons from the global landscape Several countries have integrated cryptocurrency into their economies with varying degrees of success. By analysing these diverse global models, Pakistan can identify best practices and tailor its own regulatory framework. In a landmark move in 2021, El Salvador became the first sovereign nation to adopt Bitcoin as legal tender. This audacious decision was primarily driven by the objectives of improving financial inclusion for its citizenry and diminishing reliance on the US dollar. The tangible outcomes have been noteworthy. The government's introduction of the "Chivo Wallet" has achieved remarkable uptake, with over four million downloads, encompassing more than 60% of the national population. Bitcoin adoption has facilitated a substantial 50% reduction in remittance fees, a significant benefit considering remittances previously constituted approximately 24% of El Salvador's total GDP. The issuance of $1 billion in Bitcoin-backed bonds represents a strategic initiative to secure financing for crucial infrastructure development and to attract foreign direct investment. The United Arab Emirates has strategically positioned itself as a preeminent global centre for cryptocurrency adoption and blockchain innovation, particularly within Dubai and Abu Dhabi. The UAE's cryptocurrency trading volume in 2023 surpassed $25 billion, establishing it as one of the world's largest and most dynamic digital asset marketplaces. Proactive regulatory bodies, notably the Virtual Assets Regulatory Authority (VARA), have established transparent and enabling regulatory frameworks that have successfully attracted leading international exchanges, including Binance, Kraken, and Coinbase. The UAE has seen the establishment of over 1,000 blockchain startups, which has led to economic diversification, growth, and job creation in the technology sector. Nigeria, the largest economy in Africa, exhibits one of the highest cryptocurrency adoption rates worldwide. Driven by the persistent depreciation of the Nigerian Naira and consistently high inflation rates exceeding 20%, cryptocurrency has increasingly become a vital financial refuge for millions of Nigerians seeking to preserve their capital. According to Chainalysis' Global Crypto Adoption Index, Nigeria ranks second globally in peer-to-peer (P2P) cryptocurrency transactions, indicating widespread grassroots adoption. Conservative estimates suggest that over 35% of Nigerians currently own or actively utilise cryptocurrency in various forms. The Central Bank of Nigeria (CBN), while initially imposing restrictions on cryptocurrency transactions, subsequently introduced the eNaira, Nigeria's own central bank digital currency (CBDC), signaling an official embrace of the evolving digital financial landscape and a strategic move to adapt to inevitable financial transformation. Opportunities for Pakistan The Finance Minister's recent pronouncements at the Banking Summit strongly suggest a potential paradigm shift in Pakistan's official approach to cryptocurrencies. Recognising the escalating adoption rates and the substantial potential benefits, the government is reportedly considering the formation of a National Crypto Council. This proposed council would be tasked with overseeing comprehensive policy development and proactively addressing the inherent regulatory challenges within the cryptocurrency domain. This proactive stance opens up several transformative opportunities for Pakistan. Financial inclusion A significant proportion of Pakistan's population remains unbanked and underserved by traditional financial institutions, with estimates from the World Bank indicating that approximately 110 million adults lack access to conventional banking services. Cryptocurrencies present a viable and readily accessible alternative pathway to financial empowerment. They enable individuals to participate in the burgeoning digital economy, conduct seamless transactions, and accumulate wealth, all without the prerequisite of traditional bank accounts. Research from the Cambridge Centre for Alternative Finance indicates that cryptocurrency adoption has the potential to increase financial inclusion rates by a significant 20-30% in developing economies. This impact could be particularly transformative for marginalised communities and women, who often encounter systemic barriers in accessing conventional banking services. Furthermore, successful blockchain-based microfinance initiatives, exemplified by programs in the Philippines, have demonstrably expanded banking access to over 50 million individuals, underscoring the considerable potential for similar impactful deployments within Pakistan. User-friendly digital wallets, such as Metamask, Trust Wallet, and Binance Smart Chain, can facilitate convenient access to cross-border transactions, bypassing traditional banking fees. Maximising remittances Pakistan's economy is significantly reliant on remittances from its extensive overseas workforce. In 2023, Pakistan received approximately $31.2 billion in remittances, with average transaction fees through traditional services ranging from 4-7% per transaction. Cryptocurrencies offer the potential to dramatically reduce these costs: Blockchain-based solutions, including Bitcoin's Lightning Network, enable cross-border transfers with significantly reduced fees, as low as 0.1%. Ripple's XRP facilitates real-time payment processing, further minimising transaction costs for Pakistani families dependent on remittance income. Studies suggest that the widespread adoption of blockchain-based remittance systems could generate savings exceeding $1 billion annually in transfer fees for Pakistan and this will directly increase disposable income for millions of households. Traditional remittance services like Western Union and MoneyGram typically impose fees ranging from 5-10% per transaction. The adoption of cryptocurrency-based remittance systems could yield substantial savings just like El Salvador's experience with Bitcoin-based remittances has demonstrably reduced transaction fees by up to 50%. By leveraging the inherent efficiencies of blockchain technology, cryptocurrencies facilitate near-instantaneous and low-cost international fund transfers. This capability holds substantial positive implications for remittance-dependent families and this can enable them to receive funds more expeditiously and retain a larger proportion of their earnings due to significantly diminished transaction costs. Economic growth and investment By proactively establishing a favorable and well-defined regulatory framework for cryptocurrencies, Pakistan can effectively attract foreign investment and stimulate significant economic expansion within its burgeoning cryptocurrency sector. This influx of both domestic and international investment has the potential to catalyze job creation, accelerate technological innovation across multiple sectors, and bolster overall macroeconomic stability. The UAE successfully attracted $25 billion in blockchain-related investments in 2023 alone, demonstrating the considerable potential for Pakistan to replicate this success with a similarly clear and enabling regulatory framework. A robustly regulated cryptocurrency ecosystem can effectively attract substantial international investment flows into Pakistan's technology and financial technology (fintech) sectors. Global market analysis projects the blockchain market to reach a substantial $1.43 trillion valuation by 2030, growing at a remarkable compound annual growth rate (CAGR) of 85.9%. PricewaterhouseCoopers (PwC) estimates suggest that digital asset markets, if effectively and appropriately integrated, could contribute between 5-7% to the GDP of emerging economies like Pakistan. Towards a cashless society The Government of Pakistan is actively pursuing a strategic transition towards a cashless economy for the expansion of access to digital financial services and payment solutions. Cryptocurrencies can play a pivotal and enabling role in this national transition and it can offer a secure, efficient, and transparent alternative to traditional cash transactions. This strategic alignment with digital payments directly supports the government's broader economic modernisation strategy, aimed at upgrading Pakistan's financial systems and accelerating GDP growth. To further incentivise and expedite this transition, the government could consider implementing strategic reductions in taxes applied to digital transactions for both consumers and merchants. Pakistan's strategic drive towards a digital economy can be significantly accelerated and enhanced through the strategic adoption of cryptocurrency technologies. The government's ongoing initiatives to expand digital payment infrastructure, including QR code systems and point-of-sale (POS) terminals, can effectively integrate cryptocurrencies to deliver: (1) instantaneous and frictionless payments with minimal intermediary costs and fees, (2) reduction in cash-based corruption, owing to the inherent transparency of blockchain-based transaction records on immutable ledgers, and (3) enhancement and expansion of the e-commerce sector, which is projected to reach a substantial $7.6 billion valuation by 2025 in Pakistan. Technological advancement Embracing cryptocurrencies and underlying blockchain technology can strategically position Pakistan as a regional leader in technological innovation within the rapidly evolving digital landscape. This proactive embrace can effectively attract both domestic and international talent, foster a vibrant entrepreneurial ecosystem, and generate new high-value opportunities in key technology domains such as software development, data science, and specialised blockchain engineering. Market research suggests that this nascent ecosystem possesses the potential to generate approximately $100 billion in aggregate income for technology professionals in Pakistan over the next 25 years. Blockchain technology holds the potential to create thousands of high-paying skilled jobs within Pakistan's burgeoning technology sector. India's established cryptocurrency and blockchain industry currently employs over 75,000 professionals, with average annual salaries ranging from $50,000-$150,000 USD. Pakistan has the potential to generate an estimated $100 billion in income for technology professionals over the next quarter-century by strategically embracing blockchain development and related technologies. Attracting foreign investment and tech startups A well-regulated and transparent cryptocurrency industry can transform Pakistan into a dynamic regional hub for cutting-edge blockchain technology innovation and deployment. Global market forecasts project the blockchain industry to reach a staggering $163 billion valuation by 2029, which can present immense opportunities for Pakistani entrepreneurs, technology developers, and innovators. Countries like Singapore, which have proactively implemented clear and enabling cryptocurrency regulations, have witnessed blockchain-based startups contribute in excess of $200 billion in aggregate market capitalisation. With a predominantly youthful demographic profile, with over 65% of the population under the age of 30, Pakistan possesses the intrinsic potential to become a vibrant hotspot for fintech innovation and cryptocurrency-related ventures, contingent upon the introduction of appropriately favourable and enabling policies. Challenges and mitigation strategies While the prospective opportunities presented by cryptocurrency adoption are substantial and far-reaching, Pakistan must concurrently address the inherent challenges and potential risks associated with widespread cryptocurrency integration. The existing absence of a clearly defined and comprehensive regulatory framework for cryptocurrencies within Pakistan has the potential to impede the organic growth of the cryptocurrency ecosystem and deter prospective investors, both domestic and international. The proactive establishment of transparent regulatory guidelines governing cryptocurrency trading, the implementation of clear licensing regimes for cryptocurrency exchanges and service providers, and the enforcement of robust Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols are critical initial steps to effectively mitigate this overarching risk and foster investor confidence. The inherent volatility characteristic of cryptocurrency markets poses a significant risk for investors, particularly within emerging economies such as Pakistan, where macroeconomic and financial stability can be more precarious. To effectively mitigate this risk, proactive implementation of investor education and public awareness programs is essential. These programs should be designed to promote informed decision-making among investors, emphasise responsible investment practices within the cryptocurrency domain, and highlight the potential risks associated with market volatility. Nations like Nigeria have launched central bank digital currencies (CBDCs) to stabilise digital transactions while still offering financial inclusion. Pakistan could explore similar initiatives or introduce regulatory mechanisms such as stablecoin adoption to minimise volatility risks. The broader cryptocurrency ecosystem is demonstrably vulnerable to cybersecurity threats, including cyberattacks targeting exchanges and individual wallets, as well as various forms of scams and fraudulent schemes. To comprehensively address these security concerns, the strengthening of cybersecurity measures across the cryptocurrency ecosystem is paramount. This includes promoting the development and adoption of secure platforms for cryptocurrency trading and storage, as well as proactively educating users about prevalent cybersecurity threats and effective risk mitigation strategies to safeguard their digital assets and personal information. Jurisdictions such as the United States have proactively strengthened security standards through the implementation of mandatory cybersecurity compliance frameworks for cryptocurrency exchanges and custodians, while countries like Singapore have enacted stringent consumer protection legislation specifically tailored to the digital asset space. Pakistan can improve cryptocurrency security by promoting secure trading, enforcing cybersecurity standards, and educating the public about scams. The inherent pseudonymity and, in some cases, anonymity associated with certain cryptocurrencies can be exploited for illicit purposes, including money laundering, terrorism financing, and other forms of financial crime. To effectively address this legitimate concern, the rigourous implementation of robust Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) measures within the cryptocurrency ecosystem is critical. Furthermore, collaboration with international organisations, such as the Financial Action Task Force (FATF), is essential to ensure compliance with global standards. In fact, the FATF has explicitly called upon Pakistani authorities to enhance the regulation and oversight of the domestic cryptocurrency industry. Building a supportive framework To cultivate a comprehensively supportive and enabling framework for sustainable cryptocurrency growth and innovation within Pakistan, the government of Pakistan, in close collaboration with the State Bank of Pakistan (SBP), should formulate and officially adopt a comprehensive National Cryptocurrency Strategy. This strategic document should articulate a clear and long-term roadmap for responsible cryptocurrency adoption, proactively addressing anticipated regulatory challenges, actively promoting innovation across the cryptocurrency and blockchain space, and ensuring robust investor protection mechanisms are in place. Concurrently, the government should develop and enact a comprehensive and adaptable regulatory framework specifically tailored to the cryptocurrency ecosystem. This framework should provide clear and unambiguous guidelines for cryptocurrency trading activities, establish transparent licensing requirements for cryptocurrency exchanges and service providers operating within Pakistan, and incorporate robust AML/CFT measures to mitigate financial crime risks. Proactively educating the general public about both the transformative potential benefits and the inherent risks associated with cryptocurrencies is of paramount importance. Public education initiatives are crucial to fostering responsible investment behaviors, promoting informed decision-making among cryptocurrency users, and effectively preventing the proliferation of scams and fraudulent schemes within the cryptocurrency space. Conclusion Cryptocurrency presents a transformative opportunity for Pakistan to modernise its financial sector, stimulate sustainable economic growth across multiple sectors, and achieve enhanced financial inclusion for its citizenry. By strategically adopting a balanced and nuanced approach to cryptocurrency regulation, proactively addressing the inherent challenges and potential risks, and consciously fostering a supportive and enabling framework for innovation, Pakistan can effectively harness the substantial transformative potential of this emerging technology. This strategic embrace of cryptocurrency can pave the way for a more inclusive, resilient, and prosperous digital future for Pakistan's economy and its citizens. The Finance Minister's recent statements signal a promising shift towards a more enabling stance. To realise cryptocurrency's multifaceted benefits – attracting investment and empowering citizens – Pakistan must carefully balance innovation and regulation. By diligently learning from the diverse experiences of other nations that have navigated similar pathways in cryptocurrency integration, and by implementing robust and adaptable safeguards, Pakistan can effectively navigate the inherent challenges and fully capitalise on the transformative opportunities presented by this rapidly evolving and impactful technology. Ali Asad Sabir is working as project manager at Mahbub ul Haq research centre at Lahore University of Management Sciences (LUMS) All facts and information are the sole responsibility of the author
