4 days ago
Is Trump's crypto policy opening doors for terror financing in Pakistan?
Currency that can go rogue
Synopsis Pakistan is leveraging cryptocurrency to strengthen ties with the Trump administration, amidst concerns over lax anti-money laundering enforcement and potential terror financing risks. Trump's crypto-friendly policies are opening doors for previously scrutinized figures, while Pakistan aims to align with US crypto regulations, potentially circumventing FATF and IMF scrutiny. By now, it's clear that Pakistan warmed itself with the Trump administration through the cryptocurrency route, a business into which the US president's family is both deeply involved in and invested. But it's the emerging network and cast that's beginning to uncover a tale of how Trump's move to regularise crypto is opening the door of political legitimacy to those who, until now, have been under scrutiny.
ADVERTISEMENT Changpeng Zhao, Chinese-born Canadian ex-CEO-founder of Binance, pleaded guilty two years ago for not implementing proper anti-money laundering standards. He spent time in a US prison, coughed up $4.3 bn in settlement, and was charged with allowing sanctioned entities like Hamas to raise money through his exchange. He's now appointed strategic adviser to Pakistan's crypto council.
Crypto billionaire Chinese-born St Kitts national Justin Sun - who's invested $30 mn into the Trump-linked World Liberty Financial (WLF), which has tied up business with Pakistan - also has been under investigation by the US Securities and Exchange Commission (SEC). But SEC just dropped its probe against Zhao, and may just do the same with Sun, who was charged with 'civil fraud' in 2023. He was in the headlines for attending a special dinner with Trump earlier this month.
Trump has not just reversed Biden's policy approach to cryptocurrencies, but has dismantled the enforcement framework as well, providing a new window of opportunity to those earlier sanctioned and probed. His administration has shut down US Consumer Financial Protection Bureau (CFPB) that was set up after the 2008 financial crisis to protect consumers against frauds and risks. White House's new AI and crypto czar David Sacks described CFPB at the just concluded Bitcoin 2025 in Las Vegas as a 'goon squad' that 'terrorised crypto companies' over the past few bigger worry is terror financing. US Treasury's 2024 National Terrorist Financing Risk Assessment (NTFRA) report had cautioned, 'Since the 2022 NTFRA, certain terrorist groups, such as ISIS-K and Hamas, have increased their understanding of and are experimenting with different types of virtual assets.'But Trump 2.0 has its own roadmap. After two White House executive orders, focus is on the GENIUS (Guiding and Establishing National Innovation for US Stablecoins) Bill. It has made it past the Senate Banking Committee, following which a market regulatory structure bill is set to be moved.
ADVERTISEMENT What Pakistan has tried to do is mirror similar structures to facilitate transactions. Because the GENIUS Bill conditions that it will trade stablecoins with countries that have similar legislations and US legislation builds on the idea of having a stablecoin pegged on the dollar, and issued on a 1:1 model. For one coin issued, there should be $1 in reserve. While proposing to treat these companies at par with financial services under US Bank Service Company Act, the legislation prohibits them from other services like lending, borrowing and earning by charging interests.
ADVERTISEMENT But the US treasury department had also raised the terror red flag on stablecoins in its 2024 NTFRA report: 'Stablecoins purport to be less volatile than other virtual assets and may enable terrorist groups to utilise virtual assets while mitigating the financial risks associated with price fluctuations.'
India's concerns with crypto stem from this - precisely when Pakistan as a terror sponsor state is seeking to align itself with the US. The main concern for Pakistan and its own crypto czar Bilal Bin Saqib, who was instrumental in roping in Zhao, is to make its legal frame FATF-compliant. Pakistan is hoping to piggyback on the GENIUS Bill, which the US will look to use its clout with FATF to make it the new acceptable standard on managing cryptos.
ADVERTISEMENT FATF, however, needs to be assured that the new frame complies with its 'travel rule'. This means any company must be able to provide data for the entire chain - origin to beneficiary - of a transaction. And that, too, up to a period of five years, necessitating a major proliferation in data centres that will require uninterrupted electricity. Then, there's IMF's common between Pakistan, El Salvador and Ethiopia? All three are stressed economies dependent on IMF bailout packages, but are going big on crypto. Do IMF's lending conditions permit such exposures with links to terror financing and money laundering? Pakistan may have to answer some tough questions to IMF on its decision to allocate 2,000 MW electricity for crypto mining without consultations. Or, for that matter, the unilateral announcement to set up strategic bitcoin reserve without prior intimation.
ADVERTISEMENT But Pakistan will hope for Trump to prevail on IMF. Just like he did with El Salvador. Its charismatic leader Nayib Bukele has invested 15% of the country's GDP in bitcoins. IMF had made it a condition for El Salvador's government to gradually move out from such investment. Bukele defied such a condition. And now with Trump's support, he has just secured an IMF approval for $1.4 bn additional obtained a similar approval on May 9, while Op Sindoor was on. It's now counting on Trump to overcome fresh roadblocks arising from its crypto announcements and not just gain legitimacy, but also reduce dependence on IMF by investing in bitcoin assets.
So, a new political capital in the form of 'cryptoplacy' is at play. India will have to rework its playbook accordingly. Not necessarily to embrace the idea, but certainly to deal with a clear, present and evolving security question. (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of
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