Pakistan’s Crypto Gamble Raises Major Financial Risks: Report
A new report warns that Pakistan’s move to allow cryptocurrency trading to attract foreign exchange is a dangerous gamble that could worsen its economic crisis instead of solving it.
Key Takeaways
- Atlantic Council report warns crypto legalisation could destabilise Pakistan’s fragile economy.
- Risks include money laundering, capital flight, and FATF scrutiny.
- Government is pushing ahead with regulations despite warnings.
The Washington-based Atlantic Council, in its report titled “Pakistan’s Dangerous Gamble with Crypto,” states the policy shift could amplify existing vulnerabilities. Pakistan’s central bank recently granted licenses to two crypto exchanges, hoping regulated trading will boost dwindling foreign reserves.
Why This Is Risky for Pakistan
The report highlights Pakistan’s weak regulatory framework and history of financial instability as major concerns. The nation is ill-prepared to manage crypto-related risks like terrorist financing and capital flight.
“Cryptocurrencies are highly volatile and speculative assets. For a country like Pakistan, which is already grappling with high inflation and a fragile currency, promoting crypto trading could lead to massive losses for inexperienced investors and further destabilize the economy,” the report states.
Risk of Global Scrutiny
The think tank cautions the move could draw fresh scrutiny from the global watchdog (FATF). Pakistan was previously grey-listed by the FATF for deficiencies in combating money laundering and terror financing.
Government’s Push Continues
Despite the warnings, Pakistani authorities are determined to proceed. The government is working on a comprehensive regulatory framework for digital assets, aiming to position the country as a regional crypto hub.
The Atlantic Council report concludes by urging Pakistan to prioritise traditional economic reforms and strengthen its conventional financial sector before venturing into the high-risk world of cryptocurrencies.
