09-07-2025
How Crypto Chaos In Pakistan Threatens National Security And Economic Stability
On July 8, 2025, the Pakistan government announced the establishment of the Pakistan Virtual Assets Regulatory Authority (PVARA). According to the media, this body would operate as an "independent regulator for licencing, monitoring and supervising virtual asset service providers (Vasp), ensuring alignment with the Financial Action Task Force (FATF) guidelines and international best practices."[1]
Yet, Pakistan's sudden embrace of cryptocurrency represents a dangerous confluence of geopolitical opportunism and regulatory recklessness that could transform the country into a global hub for illicit financial flows. While the Trump administration's crypto-friendly policies have opened new diplomatic channels, Pakistan's hasty pivot toward digital assets without proper legal frameworks threatens to exacerbate existing challenges with terror financing and money-laundering compliance.[2]
The most glaring contradiction in Pakistan's cryptocurrency strategy lies in its fundamental illegality within the country's own borders. Despite establishing the Pakistan Crypto Council and appointing Bilal bin Saqib as its CEO with ministerial status, cryptocurrency transactions remain prohibited under current Pakistani law.[3] Finance Secretary Imdad Ullah Bosal's categorical statement that "crypto is not a legal tender in Pakistan" exposes the nature of government policy, where officials simultaneously promote Bitcoin initiatives abroad while maintaining domestic prohibitions.
This regulatory chaos becomes particularly troubling when examined through the lens of Pakistan's appointment of Changpeng Zhao as strategic adviser to its crypto council.[4] Zhao, the Chinese-born Canadian co-founder and former CEO of Binance, pleaded guilty to failing to implement proper anti-money-laundering standards and served time in US prison.[5] Binance was found to have facilitated transactions for sanctioned entities including Hamas,[6] resulting in a $4.3 billion settlement.[7] Pakistan's decision to elevate such a controversial figure to guide its cryptocurrency strategy sends alarming signals about the country's commitment to financial integrity and counter-terrorism compliance.
Pakistan's Vulnerability To Terror Financing Through Cryptocurrency
The timing of Pakistan's crypto enthusiasm coincides suspiciously with the Trump administration's dismantling of cryptocurrency enforcement mechanisms. The closure of the Consumer Financial Protection Bureau, which had previously scrutinized crypto companies for fraud and risks, has created a regulatory vacuum that Pakistan appears eager to exploit. This alignment with Trump's deregulation agenda suggests Pakistan's cryptocurrency push is less about genuine economic development and more about currying favor with an administration that has significant business interests in the digital asset space.
Pakistan's vulnerability to terror financing through cryptocurrency channels becomes even more pronounced given the country's existing struggles with Financial Action Task Force compliance. The FATF has repeatedly placed Pakistan on its grey list for inadequate measures against money laundering and terror financing. The introduction of cryptocurrency infrastructure without robust regulatory frameworks could provide terrorist organizations with sophisticated new channels for moving funds while maintaining plausible deniability about their origins and destinations.
The technical requirements for FATF compliance in cryptocurrency transactions present particular challenges for Pakistan. The travel rule mandates that companies must provide complete transaction data from origin to beneficiary for up to five years. This requirement necessitates extensive data storage capabilities and uninterrupted electricity supply, resources that Pakistan struggles to provide even for basic economic needs. The country's allocation of 2,000 megawatts of electricity for Bitcoin mining, announced without IMF consultation, highlights the disconnect between cryptocurrency ambitions and economic realities.
Pakistan's attempt to mirror US stablecoin legislation through the GENIUS Bill framework reveals the extent to which American business interests are driving Pakistani policy. The bill's requirement that trading partners maintain similar regulatory structures creates a dependency relationship where Pakistan must align its financial regulations with US preferences to maintain access to dollar-pegged stablecoin markets. This arrangement effectively subordinates Pakistani monetary sovereignty to American commercial interests while potentially exposing the country to new forms of financial instability.
Pakistan's Domestic Cryptocurrency Prohibitions
Pakistan's strategic Bitcoin reserve announcement at the Las Vegas conference represents perhaps the most reckless aspect of its cryptocurrency gamble. Establishing sovereign cryptocurrency holdings without proper legal frameworks or risk assessment mechanisms exposes the national treasury to extreme volatility while potentially facilitating capital flight. The contradiction between promoting Bitcoin reserves internationally while maintaining domestic cryptocurrency prohibitions creates legal and operational uncertainties that could undermine both initiatives.
The International Monetary Fund's concerns about Pakistan's cryptocurrency initiatives reflect broader international skepticism about the country's approach. With Pakistan already dependent on IMF bailout packages and facing stringent conditionality requirements, the unilateral decision to allocate significant resources to cryptocurrency infrastructure without consultation represents a direct challenge to multilateral oversight mechanisms. This defiance could complicate future negotiations and potentially jeopardize essential financial support.
The precedent of El Salvador, where President Nayib Bukele invested 15 percent of GDP in Bitcoin despite IMF objections, provides a troubling model for Pakistan's strategy.[8] While Bukele ultimately secured continued IMF funding with Trump administration support, his country's extreme cryptocurrency exposure has created unprecedented fiscal vulnerabilities. Pakistan's adoption of a similar approach, given its far more precarious economic position and complex security challenges, represents an exponentially greater risk.
Pakistan Risks Transforming Itself Into A Haven For Illicit Financial Flows
The emergence of what could be termed "cryptoplacy" as a new form of diplomatic engagement creates particular dangers for countries like Pakistan with weak institutional frameworks. The ability to gain political access and potentially circumvent traditional oversight mechanisms through cryptocurrency initiatives may prove irresistible to governments seeking international legitimacy, even when such approaches fundamentally undermine domestic stability and security.
Pakistan's cryptocurrency gamble ultimately reflects a broader pattern of prioritizing short-term political gains over long-term institutional development. By embracing digital assets without adequate legal frameworks, appointing compromised individuals to key positions, and aligning financial policy with foreign business interests, Pakistan risks transforming itself into a haven for illicit financial flows while exposing its fragile economy to unnecessary volatility and external manipulation. The country's leaders must recognize that sustainable economic development requires robust institutions and regulatory clarity, not opportunistic alignment with the latest international trends.
