Pakistan has lost an estimated $600 million to illegal cryptocurrency transactions, according to a major financial official. This massive outflow of money is severely hurting the country’s formal banking system by reducing the inflow of much-needed US dollars.
The revelation was made by Malik Bostan, Chairman of the Exchange Companies Association of Pakistan (ECAP). He provided clear data showing how this illegal activity is draining dollars from the official economy.
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How the Illegal Process Works
The process bypasses the official banking channels and works as follows:
- People buy US dollars from physical exchange companies using Pakistani rupees.
- Instead of depositing these dollars into a bank or using them for legal imports, they transfer them through unlawful channels.
- These dollars are then used to purchase cryptocurrencies like Bitcoin, which are moved out of the country digitally.
This creates a shadow system that operates outside the control of the State Bank of Pakistan (SBP).
The Impact on Pakistan’s Dollar Reserves
The data confirms a alarming trend. Malik Bostan stated that last year, exchange companies sold about $4 billion to banks in the first ten months. This year, that figure has fallen sharply to just $3 billion for the same period.
He directly linked this $1 billion drop to crypto, noting, “These disappeared dollars were mostly invested in crypto currencies.”
This loss of dollars puts further pressure on Pakistan’s foreign exchange reserves, contributes to the depreciation of the Pakistani rupee, and makes it more difficult for the country to finance essential imports.
Frequently Asked Questions (FAQs)
1. Why is this considered a loss for Pakistan?
The $600 million is considered a loss because the money left the country’s formal economy through illegal channels. It was not used for productive imports or added to the national foreign exchange reserves, weakening the country’s financial position.
2. How does this affect the common person?
A reduced dollar supply in the banking system can lead to a weaker Pakistani rupee, making imported goods (like fuel, food, and machinery) more expensive and contributing to inflation.
3. Is trading cryptocurrency illegal in Pakistan?
While the State Bank has not authorized cryptocurrencies for use within Pakistan, the activity described here is illegal because it involves moving dollars out of the country through unofficial channels, violating foreign exchange laws.
4. What can be done to stop this?
Authorities need to strengthen monitoring of foreign exchange transactions and crack down on the illegal channels used to transfer money for crypto purchases. There are also ongoing discussions about regulating digital assets to bring such activities into the taxable, formal economy.
