The cryptocurrency scam unearthed by the Federal Investigation Agency (FIA) earlier this month exposes the dire need for the government to regulate the market in Pakistan. It had been reported that around Rs17.7 billion were fleeced from Pakistani investors in a massive scam that involved Binance – a popular cryptocurrency exchange – linked applications wherein investors were promised unrealistically high returns on their investment if they bring in more clients. In late December, people started contacting the FIA with complaints of these applications abruptly being shut down after it defrauded people with billions of rupees. Upon investigation, the massive scam was discovered and arrests of those involved ordered.
But if anyone in the FIA understands how the crypto market works, they would know that chances of arresting the culprit are almost nil. The aspect of anonymity in the market is key, making it near to impossible for the culprit being caught. Moreover, investing in cryptocurrency can occur across countries without the dealer having to be in the investors home country. But of course, all this is only plausible in the absence of a regulatory regime.
In October last year, the Sindh High Court had directed the provincial government to develop and submit the proposed regulatory framework for cryptocurrency within three months. A committee was also set up and suggestions were sought from all stakeholders, including the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP). But no progress has been made in this regard despite the growing interest of Pakistanis in the market. Not only the SBP and SECP – the two regulators of the finance sector – have failed to develop any framework, but even the Pakistan Telecommunication Authority (PTA) has not done anything in this regard.
Today, the cryptocurrency has become one of Asia’s fastest-growing markets. According to the Triple-A, a global cryptocurrency payment company, over 160 million current users of the market are based in Asia and this is only expected to grow in the first quarter of this year. It is then only wise for the government to regulate the market to exploit the great potential of cryptocurrencies. It must be noted that the total market capitalization of cryptocurrency in Pakistan surpassed $2 trillion last year. Regulating the market will not only build wealth in the country but also stop frauds, especially when the sword of the Financial Action Task Force (FATF) hangs over Pakistan.
