Arshad Mahmood Awan
Pakistan is experiencing a silent financial shift as large sums move through the crypto economy without oversight, and this shift is creating serious policy concerns for the state. The Chainalysis 2025 Global Adoption Index places Pakistan third in the world for crypto adoption, and most of this activity comes from small investors who use informal platforms. These trends indicate a transformation in the financial landscape, and they demand critical attention from policymakers.
Reports from the FPCCI estimated that Pakistanis held around twenty billion dollars in cryptocurrencies in the years 2020 and 2021, and the number appears to be growing. This level of informal wealth circulation means that millions of individuals are now connected to a parallel financial network. Much of this activity takes place on peer to peer platforms, operating outside formal exchanges. These platforms do not use know your customer checks, and transactions move freely without verification.
Outside the major global exchange Binance, most trading in Pakistan takes place in private channels where neither identity nor destination is verified. These networks have built trust among small traders, yet they create major vulnerabilities. Money can cross borders without detection, and no authority can trace its purpose or its origin. This raises questions about national security, economic planning, and financial transparency.
The chairman of the Exchange Companies Association of Pakistan has publicly warned that dollars are being purchased from formal exchange companies only to be routed into crypto. He claims that nearly six hundred million dollars have disappeared from the formal system due to this practice. If these claims hold true, they show a dangerous shift of liquidity away from documented channels into unregulated digital assets, weakening Pakistan’s financial position.
Such unchecked transfers could lead to renewed scrutiny from the Financial Action Task Force. Crypto based transactions can be used for money laundering, tax evasion, or financing unlawful activity. The FATF requires countries to regulate digital asset service providers, verify originator and beneficiary information, and ensure strict supervision. Pakistan has made progress in the past, but crypto loopholes can reopen old vulnerabilities.
On the regulatory front, Pakistan is still taking early steps. The Pakistan Crypto Council, established this year, has not yet issued complete regulatory guidelines. There is limited clarity on licensing needs, disclosure obligations, or compliance structures. Policymakers must understand that partial regulation cannot respond to a financial sector that moves at digital speed. Delay increases exposure and creates room for misuse.
The Pakistan Virtual Asset Regulatory Authority has begun the process of inviting global exchanges to express interest in licensing, yet this is only an initial move. The real challenge is the vast local trade that happens through informal peer to peer systems. These unlicensed platforms operate at the grassroots level, and they serve millions of users. Any regulatory framework that does not directly address them will remain incomplete.
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The scale of small investor involvement means that crypto in Pakistan is not an elite activity. It is a mass movement driven by economic hardship, inflation, and distrust in the financial system. When citizens seek refuge in an unregulated digital market, it signals structural weaknesses in the economy. Policymakers cannot ignore this shift or dismiss it as a temporary trend. It reflects real economic anxiety and diminishing confidence in formal banking.
The financial risks are severe. Illicit transfers can undermine the exchange rate, destabilise currency reserves, and create pressure on formal banks. If law enforcement agencies fail to track these flows, Pakistan may again face the risk of global monitoring or grey listing. These outcomes would hurt investment, trade, and the country’s international credibility.
A comprehensive response must combine regulation, public awareness, and institutional coordination. The state must map the scale of the crypto economy, identify major platforms, and introduce strict reporting requirements. Service providers must be registered, verified, and continuously monitored. Public campaigns should inform citizens about risks, including fraud and legal consequences. Regulators must also collaborate with global exchanges to ensure compliance and transparency.
The warning from the chairman of exchange companies should be taken seriously. Pakistan must prepare a complete framework before international watchdogs intervene. The country cannot afford another period of global scrutiny. A timely and firm regulatory structure will protect the economy, restore confidence, and ensure that digital innovation does not turn into financial instability.
This moment demands clear policy action. Pakistan must recognise the scale of crypto activity and respond with seriousness. A robust framework can safeguard national security, protect public investments, and integrate digital assets into the formal economy. Without such action, the country risks deeper financial turbulence and renewed global pressure.
