KARACHI: Rain Financial, a Bahrain-based cryptocurrency exchange, is seeking a legal framework to enter Pakistan’s virtual assets market to start full-fledged crypto trading operations, its representative for Pakistan said on Friday.
Rain Financial is licensed by the central bank of Bahrain as a crypto asset services provider. Headquartered in the kingdom, the company is operational in six countries, including Turkey, and is now engaged with Pakistani authorities to come up with regulations to facilitate cryptocurrency trade in the South Asian nation.
A cryptocurrency is a digital medium of exchange which is encrypted and decentralized as there is no central authority that manages and maintains the value of the cryptocurrency.
“Currently, we are only advocating for licensing and regularization (of cryptocurrencies) through engagement with Pakistani authorities,” Zeeshan Ahmed, Rain Financial general manager for Pakistan, told Arab News.
“Our plans are that we want to continue advocacy, educate people, and want to do business in proper legal manner that is why we are engaged with the government in the first place. If regularized, we will set up offices in Pakistan, hire people, play effective role in the economy that would directly support government in the form of new sector that would generate taxes.”
The South Asian nation has not regularized cryptocurrency trading so far though the country stands at the third position on the Global Crypto Adoption Index 2020-21, according to Chainalysis, a blockchain data platform that provides data and research to government agencies, exchanges, financial institutions.
In 2021, cryptocurrency and property were declared the best performing asset class in Pakistan, having around $20 billion of cryptocurrency value, according to a Federation of Pakistan Chambers of Commerce and Industry (FPCCI) report.
Though the central bank of Pakistan had declared that virtual currencies (VCs) or Initial Coin Offerings (ICO) tokens as illegal back in 2018, but the country still has to decide about the future of cryptocurrency trade within its territorial boundaries.
In June this year, Pakistani authorities, including ministries of finance and law and justice, had recommended a mass awareness campaign against crypto trade in the country, saying “no existing law classifies or recognizes digital assets or crypto currencies,” according to an official document seen by Arab News.
“No technological infrastructure or mechanism is available in the country to regulate the business and activities of crypto currencies, nor it is possible to establish such infrastructure in near future; risks of allowing crypto currencies far outweigh the perceived benefits,” the document read.
The authorities have also identified risks associated with the cryptocurrency trade, including flight of capital and pressure on foreign exchange reserves, risk of non-compliance of Financial Action Task Force’s (FATF) anti-money laundering and combating financing of terror (AML/CFT) requirements, legal and regulatory risks, risk of enforcement due to multiple jurisdictions, challenges of monitoring, financial frauds and consumer protection.
The Rain Financial country representative, however, said the developments for crypto trade in Pakistan were in the analytical phase at present.
“Pakistani authorities are considering pros and cons of the cryptocurrencies trading and what are tailor-made solutions available for the economy,” Ahmed said. “The fact is that the crypto trading is taking place in Pakistan and Chainanalysis has informed us that 3-4 million users are in Pakistan who traded $18 billion last year.”
Pakistan is much concerned about the flight of capital through crypto trade but Pakistani authorities have no data available, mainly due to the illegal nature of trading.
“The flight of capital is still taking place through the crypto trade – authorities have no data that could show how much the flight of capital is taking place with the existing trade,” Ahmed said. “When the regularized exchange comes, it identifies players, gives inflow and outflow data reports as compared to the present day scenario where all gates are open and no one has the data available.”
The Rain Financial official believed that regularized cryptocurrency exchanges could not only financially support the Pakistani government, but they might also attract investment in Pakistan.
“When you legalize and regularize, you get the insight on outflow while attracting new business on inflows. All the crypto players will come to the exchange which is regularized,” Ahmed said. “For example in Dubai, they have formed a virtual asset regulatory authority and today you can buy air tickets, pay rents and buy property through crypto. How inflows will not be attracted if you regularize the trade.”
Though Pakistan has yet to recognize and set regulations to legalize cryptocurrency trade, the Rain Financial official was confident it would eventually be done.
“Eventual regularization of crypto trading is inevitable [in Pakistan] ... how long it takes will have to be seen. This is what I have learnt from the experience of other countries because its benefits have been seen and adoption in our youth is already on the higher side,” Ahmed added.
