How Does Bitcoin Impact Financial System of Pakistan?
Globally, a growing number of individuals and businesses are turning to cryptocurrencies for a variety of investment, transactional, and operational purposes. Pakistan is no different. According to the 2021 Chainalysis Global Crypto Adoption Index, Pakistan has the third greatest number of crypto and bitcoin users among the top ten countries.
Others value the cryptocurrency’s decentralized nature and user autonomy, while some applaud its ability to facilitate real-time, secure, and expedited money transfers. Since there is no middleman, there is a low transaction fee, which is another conspicuous reason for the rise in popularity of cryptocurrencies.
The Lahore University of Management Sciences received a $4.1 million grant in February to study the Stacks blockchain network, which connects Bitcoin applications and smart contracts.
Waqar Zaka, a former TV host with over a million YouTube subscribers, has spent years lobbying officials to not only legitimize the industry but also invest in it. Like Ahmed, Zaka had established a cryptocurrency mining facility utilizing hydroelectric power.
This year, the provincial administration of Khyber-Pakhtunkhwa appointed Zaka and Ahmed to a committee studying how the province can profit from such ventures. The group declared in March that it was considering establishing new mining farms using Zaka’s facility as a model.
The committee was dissolved in June, with the provincial government stating that any new cryptocurrency policies should be handled by the federal government.
Pakistan’s ongoing economic crisis is one factor that has contributed to Bitcoin’s growing prominence there. Significant depreciation of the Pakistani rupee against the US dollar has led to a rise in inflation, which has negatively impacted the economy of the country. Due to these circumstances, some Pakistanis have begun investing in Bitcoin.
Bitcoin has also demonstrated potential in Pakistan for cross-border transactions. The nation has a substantial number of overseas employees who send money home. Traditional money transfer services charge high fees, which can deplete the recipient’s funds significantly. Bitcoin, on the other hand, provides a quicker, less expensive, and more secure option for international money transfers.
Moreover, Bitcoin’s fundamental technology, blockchain, has the potential to revolutionize numerous industries, such as finance, healthcare, and logistics. Several blockchain-based businesses have emerged in Pakistan with the intention of disrupting traditional industry practices by leveraging this technology’s efficiency and transparency.
According to a discussion conducted on December 13 by the South Asia Center of the Atlantic Council, Pakistan witnessed a significant increase in cryptocurrency investments during the pandemic, with market capitalization exceeding $2 trillion last year.
According to a report by the Federation of Pakistan Chamber of Commerce and Industry, Pakistan’s primary trade regulatory authority, the country recorded $20 billion worth of cryptocurrencies in the fiscal year 2020-2021, which represented an unprecedented increase of 711%.
The federation also stated that cryptocurrencies flourished primarily during pandemics and that the largest crypto exchange utilized by Pakistani investors was Binance, followed by Localbitcoins.com and Binomo.
According to the report, 67% of crypto-investors in Pakistan use centralized services, while only 33% use decentralized financing platforms to conduct crypto-related transactions.
There are numerous social media organizations in Pakistan that explain how to trade and mine cryptocurrency, with some having tens of thousands of Facebook followers. On YouTube, videos in Urdu about cryptocurrencies have been viewed hundreds of thousands of times.
The majority of online cryptocurrency exchanges are located outside Pakistan, such as Localbitcoins.com, which lists hundreds of Pakistani merchants, some of whom have conducted thousands of transactions.
According to the web analytics company SimilarWeb, apps like Binance and Binomo that monitor and trade cryptocurrency have more downloads than some of the nation’s largest banks’ apps.
Bitcoin’s function in the financial system extends to unbanked and underbanked individuals. Numerous individuals around the world lack access to conventional financial systems, limiting their economic opportunities.
Bitcoin offers these individuals a novel way to gain access to financial services such as remittances, loans, and savings. Due to Bitcoin’s decentralized nature, anyone with an internet connection can participate in the network, regardless of their location.
Bitcoin’s function in the financial system is extremely significant, and its financial benefits are numerous. Bitcoin offers unbanked individuals an alternative investment option, quick and convenient transactions, and access to financial services. As Bitcoin’s adoption continues to increase, it will likely become an integral part of the financial system, presenting investors and individuals with new opportunities.
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