Cryptocurrency has captured the imagination of many around the world, and Pakistan is no exception. However, a sort of crypto bug seems to have bitten the government recently — raising eyebrows both domestically and internationally. While some level of interest in crypto is understandable, the line between crypto as a political tool and crypto as a serious business proposition is critical to keep in mind. The stakes are high, because public resources are on the line.
Crypto as Influence Peddling: A Growing Concern
Recent international media reports suggest that part of Pakistan’s government interest in cryptocurrency revolves around gaining influence in Washington DC. Officials close to the Trump administration have been involved in crypto discussions with Pakistani counterparts.
From this perspective, one could say “it is what it is” — governments use emerging trends to build relationships and geopolitical leverage. But this becomes dangerous the moment the government treats crypto as a business or investment avenue rather than a diplomatic tool. The problem is that the resources at risk here are public, taxpayer-funded assets.
The Risk of Gambling with Sovereign Reserves
After the announcement of Pakistan’s Crypto Council, several suggestions have emerged on how Pakistan could expand its crypto involvement. One particularly alarming idea is to allocate a portion of the country’s foreign exchange reserves into cryptocurrencies like Bitcoin.
This suggestion often comes wrapped in a simplistic sales pitch — pointing to Bitcoin’s spectacular rise over the past decade and implying massive potential gains for Pakistan. But what gets conveniently left out is Bitcoin’s extreme volatility.
Sovereign reserves are never gambled on volatile assets. Instead, they are invested in fixed-income, low-risk instruments designed to protect national economic stability. Think pension funds or institutional savings — the rule is always low risk and predictable returns.
Crypto Mining Incentives: Who Benefits?
Another popular proposal is to incentivize crypto mining in Pakistan by offering electricity at rock-bottom prices — as low as 5 to 6 cents per unit. To put that into perspective, residential electricity consumers typically pay around 20 cents per unit, and industrial users about 14 cents.
This raises a critical question: If Pakistan indeed has cheap electricity to spare, why should crypto miners be the first in line to receive it? Why prioritize crypto mining — a speculative, energy-intensive activity — over critical sectors like healthcare, education, or manufacturing?
Adding to the confusion was a recent press release from the Finance Ministry announcing the allocation of 2000MW for crypto mining — without mentioning the price or any clear policy framework. In Pakistan, electricity is not allocated by quotas or sectors in such a rigid manner, so the announcement left more questions than answers.
The Idea of Regulated Crypto Exchanges: A Safer Path?
One proposal that appears less risky is to create on-shore crypto exchanges regulated like commodity exchanges. This step would simply regulate crypto trading, without putting public resources at risk. Regulated trading platforms could provide more transparency and protect investors from scams, but it doesn’t solve the fundamental issue that cryptocurrencies are highly speculative and unstable assets.
The Nature of Crypto: A Fictitious Asset
It is vital to understand that cryptocurrencies are fictitious assets — assets that exist only because holders believe in their value.
Money and gold are also fictitious in nature, but they have widespread acceptance and liquidity. They are trusted to be exchanged for goods and services almost universally. Crypto, on the other hand, remains speculative — driven largely by market hype and speculation rather than intrinsic value.
This speculative nature makes crypto extremely volatile and risky, especially for sovereign investors or public funds entrusted with preserving national wealth.
History’s Lessons: Fictitious Assets and Financial Crises
Fictitious assets are not new. History is littered with examples of how they have destabilized economies:
- The South Sea Bubble of the 18th century: investments poured into a company with no real business prospects, leading to a massive crash.
- The Collateralized Debt Obligations (CDOs) crisis in 2008: these complex financial products were essentially bundles of risky mortgages sold as safe assets, sparking the Great Recession.
While regulation has tamed some of these risks, new forms of speculative assets continue to emerge, including crypto.
Why the Government Must Beware
While individual investors may choose to trade cryptocurrencies with their own money, it is highly risky and irresponsible for governments to expose public funds to such volatility. The lure of quick gains can blind decision-makers to the potential fallout of a crypto crash or regulatory clampdown.
Crypto enthusiasts and industry players often market cryptocurrencies aggressively — much like snake oil salesmen — promising huge profits but glossing over the immense risks.
Conclusion: Proceed with Caution
Pakistan’s flirtation with cryptocurrency may offer some diplomatic advantages or potential business opportunities, but it carries significant risks. Public resources are not play money.
The government must differentiate between crypto as a tool for influence and political leverage versus crypto as a serious and sustainable business venture. Investing sovereign reserves or offering cheap electricity incentives without a robust regulatory and risk management framework could jeopardize economic stability.
For now, regulated crypto exchanges seem the safest avenue for Pakistan to engage with the crypto world — balancing innovation with caution.