KARACHI: Bahrain-based Rain Financial, a cryptocurrency trading platform, is persuading local regulators to issue a legal framework for the formalization of crypto trading in Pakistan.
Speaking to Dawn in a recent interview, Rain Financial Country Managing Director Zeeshan Ahmed said trading in crypto assets – digital currencies in which transactions are verified and recorded by a decentralized system – currently exists in a regulatory “no man’s land”.
“No law declares crypto illegal. Have authorities frowned on crypto? Yes. But issuing a statement is one thing and translating it into law is another,” he said.
Former central bank governor Dr. Reza Baqir said in March that the risks of using cryptocurrencies outweigh the benefits. Previously, the central bank issued a formal notice advising the general public to exercise caution and refrain from trading cryptocurrencies.
“Negotiations are ongoing. These are high-impact decisions involving many ideas and proposals,” Mr. Ahmed said, expressing hope that the authorities will realize the benefits of formalizing an activity that is already taking place outside the regulatory framework.
According to data platform Chainalysis website, Pakistanis recorded over $604 million in profits from crypto trading in 2021. Pakistan is also among the top-ranked countries in the Global Crypto Adoption Index. This is despite the fact that the central bank does not recognize cryptocurrencies as legal tender and as such has not authorized any exchanges to facilitate their trading.
Still, Pakistanis trade digital coins on crypto exchanges like Binance in peer-to-peer transactions. Simply put, buyers and sellers agree to trade coins on the exchange app, which leads to the same assets being deposited in a blocked/frozen account. The buyer then transfers money to the seller within a short period of time and produces the proof of payment to the trading platform to take possession of it. Alternatively, one can use a hundi/hawala channel to buy or sell coins on a crypto exchange. The unregulated structure of the trade means that the government gets no tax on capital gains accrued by investors.
“We believe in regularized and licensed platforms. When we want to enter a market, we first engage the regulator and show them the added value and benefits (of cryptocurrencies). Unregulated markets like Pakistan face capital flight and risks for individuals and institutions,” Mr. Ahmed said.
Rain Financial was incorporated into Bahrain’s central bank sandbox in 2017 as a crypto asset company. The Federal Monetary Authority issued a crypto policy framework in 2018 and the company received its license in 2019.
Mr. Ahmed said the exchange is a major crypto trading platform in the markets it already operates in. The estimated crypto trading volume in 2021 was close to $100 billion. “Our share was $2 billion. A regional player currently, we are on the way to becoming a global player,” he said.
Crypto enthusiasts tout digital currencies as a reliable medium of exchange, a store of value, a hedge against inflation, and a safe investment in the event of disaster – attributes that are conspicuously lacking in the more than 10,000 cryptocurrencies that exist today. currently exist.
Rain Financial’s bid to enter the Pakistani market could not have come at a less opportune time. No less than $2 trillion has been wiped from the combined cryptocurrency market capitalization in the past six months. The crash is so big that China’s blockchain-based service network, a government-linked initiative to promote commercial adoption of blockchain technology, has called cryptocurrencies the biggest Ponzi scheme in the world. history of mankind.
Mr Ahmed said momentary setbacks should not be interpreted as the final verdict of history. The continued evolution of cryptocurrencies, he says, is as important an event as the Industrial Revolution.
“This volatility seems excessive in the short term, but it is not. The global (crypto) adoption (rate) is only 7%,” he said, noting that volatility will decrease in the long run.
Mr. Ahmed expects Pakistan to be a high volume, low transaction market for Rain Financial once regulators allow formal cryptocurrency trading. Around 2 million Pakistanis have downloaded the crypto exchange apps so far. The number will likely increase fourfold once authorities grant legal cover to cryptocurrencies, he said.
“Within a year (after the exchanges are formalized), I expect 70-80 million Pakistanis to trade $7-10 worth of crypto assets per month each,” he said. .
Posted in Dawn, July 13, 2022