• Buyers deposit dollars in FCY accounts, then withdraw to invest in cryptos
• Dollar sales to banks drop to $3bn in 10 months

KARACHI: The country has lost an estimated $600 million to illegal crypto transactions, a development that has sharply reduced the flow of dollars into the banking system as people buy dollars from exchange companies and route them into cryptocurrencies through unlawful channels.

“Last year, during the first 10 months of the calendar year, we sold banks about $4 billion, which fell to $3 billion during the same period this year. These disappeared dollars were mostly invested in crypto currencies,” said Exchange Companies Association of Pakistan Chairman Malik Bostan.

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He said people buying dollars from exchange companies are depositing them in their foreign currency (FCY) accounts, from where they withdraw the dollars and purchase cryptocurrencies through illegal means. During Jan-October this year, Pakistanis retained about $400m in their FCY accounts, while $600m left the country with no trace.

The State Bank recently issued a circular instructing both banks and exchange companies not to provide cash dollars; instead, they must transfer the amount directly into the customer’s FCY account for deposit purposes.

Exchange companies now either issue cheques or directly transfer funds into customers’ FCY accounts. Mr Malik said these deposited dollars are then withdrawn from banks’ FCY accounts and invested in cryptocurrencies.

Dollar sales to banks also dropped during the first four months of the current fiscal year, despite tight controls on borders with Afghanistan and Iran. Data shows that exchange companies sold $280m in July this year ($333m in 2024); $163m in August ($295m in 2024); $186m in September ($214m in 2024); and $244m in October ($297m in 2024). Total sales to banks during July-Oct 2024 were $1.139 billion, which fell to $873m in the first four months of 2025 — a decline of 23 per cent.

State Bank data shows that commercial banks’ dollar holdings increased from $4.180bn in January 2025 to $4.625bn, an increase of $425m.

The country has faced a serious shortage of dollars for years and was close to default in 2023. After receiving an IMF bailout, the government and the State Bank imposed restrictions on imports to reduce trade and current account deficits, while launching a crackdown on illegal trading and dollar smuggling. Illegal trading is now largely under control, but this new trend of crypto investments could undermine policymakers’ efforts to save dollars and reduce reliance on foreign exchange loans.

Meanwhile, the government is preparing to enter the international financial market with new bonds, as well as the Chinese market with Panda Bonds. Currently, the State Bank’s foreign exchange reserves stand at about $14.551bn, and the bank expects reserves to reach $17bn by the end of FY26.

Higher remittance inflows have allowed the central bank to make payments for debt servicing and other obligations while still maintaining more than $14.5bn in reserves.

Currency experts believe the IMF will release the expected $1.2 billion, which would further boost the SBP’s reserves.

Published in Dawn, November 22nd, 2025