KARACHI: Pakistan cannot regulate cryptocurrencies within its current financial system, as the State Bank tightly manages foreign exchange, but virtual assets may still serve as an alternative to hawala, said former Federal Board of Revenue (FBR) chairman and economist Shabbar Zaidi.

Speaking at a session on Adopting Digital Currency and Cryptocurrency in Pakistan: Possibilities and Concerns, organised by the Pakistan Institute of International Affairs (PIIA) on Saturday, Mr Zaidi outlined the risks and opportunities surrounding digital currencies.

He said a law enabling cryptocurrency regulation has been passed and is under discussion in parliament. However, he stressed that digital or virtual currencies, by design, are difficult to regulate.

“Cryptocurrencies flourish because they leave no trail. A currency born unregulated cannot be regulated,” he argued. While the US market has seen widespread adoption, he noted, the difference lies in the freer foreign exchange regime. In Pakistan, commercial banks cannot buy and sell dollars without the State Bank’s permission.

Says Pakistan cannot regulate virtual currencies under current system; nearly 9m Pakistanis hold digital assets

Trust and acceptance

Mr Zaidi estimated that around nine million Pakistanis hold or trade virtual currencies, primarily Bitcoin, a decentralised digital asset where transactions are recorded on a blockchain and issuance is independent of any central bank.

He added that digital currencies are already being used to settle transactions, including under-invoicing in trade with China, in ways similar to the hawala system. “This is not about being too fast or too slow in adoption. The reality is that our system cannot regulate it,” he said.

He emphasised that all currencies are built on trust, pointing to the US dollar today and the British pound in the past. Similarly, a trusted digital currency could emerge as a medium of payment worldwide.

He suggested that asset-backed cryptocurrencies could, in theory, be issued, but demand would remain weak since unregulated digital assets allow holders to convert black money into white.

Citing examples abroad, he noted that India had formally rejected cryptocurrencies, while in the US, they continue to grow in popularity.

He also linked cryptocurrencies to political debates in the US, claiming that former president Donald Trump’s administration supported them after facing resistance from the Federal Reserve. Mr Zaidi quoted a banker as saying the Trump family earned $2.4bn through virtual currencies during their time in office.

Digitisation versus crypto

While acknowledging Pakistan’s progress in digitising its financial system, Mr Zaidi underlined that crypto belongs to a different domain.

“Digitisation is about documentation and traceability. Crypto thrives on the opposite — anonymity and lack of control,” he said.

Experts at the session noted that the use of virtual currencies in Pakistan is likely to continue growing, particularly as tight foreign exchange controls limit other avenues for cross-border payments.

Published in Dawn, September 14th, 2025