Cryptocurrency, the digital asset that operates on blockchain technology, has been gaining traction in recent years. It’s a decentralized currency that isn’t controlled by any central authority, making it attractive to those who value privacy and autonomy. However, the legal status of cryptocurrency is still ambiguous in many countries. Despite this, businesses are increasingly willing to accept cryptocurrencies as a form of payment, and investors are flocking to cryptocurrencies as a new asset class.
The rise of cryptocurrency can be attributed to a few key factors. First, the technology behind it is secure and transparent, making it difficult for fraudulent activities to occur. Additionally, cryptocurrencies have a limited supply, making them highly sought after and valuable. Bitcoin, the first and most well-known cryptocurrency, has seen incredible growth since its founding in 2009, with its value reaching an all-time high of $64,000 in April 2021.
Businesses are beginning to recognize the potential benefits of accepting cryptocurrencies as a form of payment. One of the main advantages is its immediate settlement, as transactions can be completed within seconds. Moreover, the transaction fees associated with using cryptocurrencies are often lower compared to conventional payment methods such as credit cards, which can save businesses a significant amount of money in the long run. There is also a growing trend of online businesses offering discounts to customers who pay with cryptocurrency, incentivizing the adoption of the new payment method.
Another reason why businesses are accepting cryptocurrencies is that it allows them to operate on a global scale without the need to constantly convert currencies. With cryptocurrencies, businesses can accept payments from customers all over the world, without having to worry about exchange rates or regulations. This is a significant benefit for companies that operate in multiple countries or engage in cross-border transactions.
One industry that has embraced cryptocurrencies is the gaming industry. In-game currencies have been a staple in the industry for many years, but in recent years, the use of cryptocurrencies has grown exponentially. Many online gaming platforms now offer a variety of cryptocurrencies as a form of payment, making it more accessible for gamers who are looking to invest in cryptocurrencies or use them for in-game purchases.
Despite the growing popularity of cryptocurrencies, many governments are hesitant to fully embrace them due to their association with illegal activities such as money laundering and fraud. Additionally, cryptocurrencies are often used as a means of avoiding traditional banking systems and taxation, making them a potential target for regulation.
That being said, some countries have taken a more progressive approach towards cryptocurrencies. For instance, El Salvador has become the first country in the world to officially recognize Bitcoin as legal tender, allowing its citizens to use the cryptocurrency for day-to-day transactions. Moreover, other countries such as Switzerland, Japan, and Malta have established favorable regulations for cryptocurrency exchanges and businesses.
The growth of cryptocurrency has also led to the rise of cryptocurrency investing. With the increasing popularity of cryptocurrencies, a number of investment options have emerged, such as buying and holding cryptocurrency assets or investing in cryptocurrencies through exchange-traded funds (ETFs) or mutual funds. Some investors see cryptocurrencies as a way to diversify their portfolios, while others see them as a long-term investment opportunity.
Nevertheless, investing in cryptocurrencies remains a high-risk investment due to their volatility and regulatory uncertainty. The price of cryptocurrencies can fluctuate rapidly, and there is no guarantee of their value in the future. Therefore, investors need to do their research and exercise caution when investing in cryptocurrencies.
In conclusion, the growth of cryptocurrency is gaining momentum despite its ambiguous legal status in many countries. Businesses are increasingly accepting cryptocurrencies as a form of payment due to their immediate settlement and lower transaction fees. Additionally, crypto has become more attractive to investors as a new asset class. While regulation and adoption remain a challenge for cryptocurrencies, the potential benefits they offer continue to draw interest and investment from businesses and individuals alike.
Despite strict warnings from banks against using debit or credit cards for crypto trading, cryptocurrencies are gaining popularity in Pakistan. Rain Financial, a Gulf-based trading platform for cryptocurrencies, estimates that the annual trading volume of cryptocurrencies for Pakistan-based wallets has increased from $18-20bn to $25bn over the last year. However, the State Bank of Pakistan (SBP) doesn’t recognise crypto assets and issued a warning advising against trading them. While no official figures exist for the extent of crypto trading in Pakistan, it can be assumed that Pakistan-based wallets hold crypto assets worth $8.3bn.
Experts claim that buying and selling cryptocurrencies is as easy as pie, despite the central bank’s ban on the practice. One popular method involves registering a wallet on a trading platform like Coinbase and asking an overseas acquaintance to buy and deposit assets on behalf of the buyer. The ultimate buyer in Pakistan then transfers the equivalent amount in rupees to the seller’s local bank account. Another popular way is through local crypto traders, who own coins purchased using the illegal remittance system. They are willing to play counterparty to anyone wanting to buy or sell crypto assets using hard cash. Another method is trading in cryptocurrency via person-to-person payments. The digital currency is transferred to the wallet, and the seller is paid via a bank transfer.
Rain Financial is making efforts to convince the SBP to recognise cryptocurrencies, but these have not yet yielded any concrete results. There are concerns that legalising crypto trading would lead to an outflow of dollars from Pakistan as buyers purchase assets on foreign exchanges. A technology entrepreneur has suggested formalising crypto trading using geo-ring fencing, which would allow crypto assets held in Pakistan-based wallets only to be sold to other Pakistan-based wallets. Geo-ring fencing would ensure that $6bn-$10bn held by Pakistanis in crypto assets would stay with the country, and the government could also collect tax on those holdings.
Pakistan Mercantile Exchange (PMEX) Managing Director Ejaz Ali Shah is eager to roll out cash-settled futures contracts for cryptocurrencies. However, that will not be possible until SBP recognises cryptocurrencies as assets. The PMEX currently lets roughly 25,000 investors buy and sell different sorts of contracts, ranging from gold, silver, oil and gas to copper, palladium, and even indexes of global stock exchanges. All futures contracts are cash-settled except a few contracts in gold that are deliverable. The cash-settled nature of crypto futures contracts could prevent outflows of foreign exchange.
In summary, despite warnings from banks and the SBP’s formal notice against trading cryptocurrencies, cryptocurrencies are gaining popularity in Pakistan. While no official figures exist for the extent of crypto trading in Pakistan, estimates by Rain Financial suggest that the annual trading volume of cryptocurrencies for Pakistan-based wallets has increased significantly over the last year. Legalising crypto trading faces obstacles, including the expected outflow of dollars, but some experts suggest using geo-ring fencing to keep crypto assets in Pakistan and allow government taxation. Managing Director Ejaz Ali Shah also proposes rolling out cash-settled futures contracts for cryptocurrencies at PMEX once cryptocurrencies are recognised as assets.
