Pakistan and Blockchain for Remittances

Pakistan, ranked among the top 10 countries for remittances, is considering leveraging blockchain technology to enhance efficiency in this sector, according to Bilal bin Saqib, chief adviser to the finance minister and a member of the Pakistan Crypto Council (PCC).

In the fiscal year 2023-24, overseas Pakistanis sent over $31 billion through conventional methods that are often slow and costly, with fees exceeding 5%.

Remittances, whether in cash or goods, serve as a financial lifeline in many nations, helping to buffer economic crises and promoting sustainable growth.

Saqib stated, “The PCC will explore blockchain-based remittance solutions to minimize costs and delays. We also plan to invest in blockchain education, upskilling initiatives, and Web3 development to nurture talent, enhance employment opportunities, and stimulate economic growth.”

Blockchain technology can enhance overseas fund transfers by removing intermediaries like correspondent banks, potentially leading to lower cross-border transaction costs, as noted by the OECD in a 2020 report.

While trading in cryptocurrencies and stablecoins remains banned in Pakistan due to a 2018 directive from the State Bank of Pakistan (SBP), the country is one of the five Asian nations listed in Chainalysis’ 2024 Global Crypto Adoption Index. A significant portion of the population utilizes digital assets to mitigate inflation and volatility in currency exchange rates and the broader economy.

Saqib explained, “This indicates a strong demand despite the lack of regulatory clarity. With over 60% of Pakistan’s 240 million people under 30, the tech-savvy youth are ready to lead blockchain and Web3 innovation. The PCC aims to harness this untapped potential by promoting a clear and progressive regulatory environment.”

The PCC is also exploring initiatives such as tokenizing real-world assets and creating regulatory sandboxes, all while ensuring compliance with Financial Action Task Force (FATF) standards. Notably, the FATF removed Pakistan from its gray list in 2022.

“Illegal crypto outflows are a major concern,” Saqib remarked. “Without regulation, cryptocurrencies may facilitate untracked cross-border transactions, worsening dollar shortages. Our first priority is to create a solid, transparent regulatory framework that requires know-your-customer (KYC) and anti-money laundering (AML) compliance for all crypto-related activities.”

Globally, regulatory frameworks are evolving, including in Southeast Asia, following President Donald Trump’s endorsement of the digital assets sector after winning the U.S. presidential election.

Recently, Trump proposed establishing a strategic bitcoin reserve using BTC and other coins seized during enforcement activities. Saqib expressed uncertainty regarding the viability of such an initiative for Pakistan, stating, “While a BTC reserve from seized assets might seem appealing, Pakistan’s crypto enforcement is still in its early stages, and illicit assets are seldom intercepted at scale. Any effort towards a strategic reserve would require careful discussions with the IMF and FATF to maintain international support and safeguard Pakistan’s favorable post-gray-list status.”