Dr. Ikramul Haq & Abdul Rauf Shakoori
The cryptocurrency revolution is increasingly redefining global financial norms, and Pakistan’s recent exploration into digital asset integration represents a significant policy shift. The government’s initiative to establish Pakistan Crypto Council (PCC) in February 2025 marked the country’s first structured attempt to embrace crypto economics, signaling a potential pivot toward modernization, financial inclusion, and strategic digital asset accumulation.
The Council’s proposals included leveraging surplus energy to mine Bitcoin and allocating a portion of mined assets as national treasury reserves. The May 2025 announcement that 2,000 megawatts of excess energy would be diverted to crypto mining and high-performance computing centers illustrates Pakistan’s bold experimentation in the decentralized finance domain.
The appointment of Binance co-founder Changpeng Zhao as an advisor highlights the government’s ambition to attract global expertise and investor confidence. The ambition, however, must now be weighed against constitutional mandates, fiscal capacity, institutional capacity, and geopolitical obligations. The idea of making cryptocurrency a legal tender in Pakistan akin to El Salvador’s approach triggers complex legal and macroeconomic considerations. The possibility, if entertained, would signify an overhaul of Pakistan’s financial sovereignty, banking framework, and monetary policy.
The Constitution of Islamic Republic of Pakistan, Pakistan Currency Act, 1950 and related provisions under the State Bank of Pakistan Act, 1956 designate the Pakistani rupee as the only legal currency backed by sovereign guarantee. The State’s authority to regulate and issue currency is rooted in fiat norms, and any deviation toward decentralized digital assets would require amendments by Legislature and their judicial interpretation by the Supreme Court. The implications are enormously far-reaching, replacing or co-recognizing a decentralized token as legal tender would strain the legal architecture, diminish central bank authority, and create uncertainty in contract enforcement, taxation, and consumer rights.
The legal tender debate further raises operational risks. The volatility of crypto assets makes them unsuitable for day-to-day transactions in developing economies prone to inflation, external shocks, and fiscal deficits. The lack of universal infrastructure for wallet integration, taxation enforcement, and dispute resolution would make nationwide adoption chaotic. The digital divide in Pakistan both in access and literacy would further exclude large segments of the population, exacerbating financial inequality.
The acceptance of crypto as legal tender would also provoke international scrutiny, especially from the International Monetary Fund (IMF), which has consistently cautioned against crypto dollarization in fragile economies. The IMF’s concern centers on monetary instability, capital flight, and weakening anti-money laundering controls concerns highly relevant to Pakistan’s macroeconomic fragility and compliance obligations.
The concept of maintaining strategic reserves in cryptocurrency, particularly Bitcoin, as told by the CEO of Pakistan Crypto Council, presents an alternative path distinct from legal tender recognition. The idea envisions Pakistan allocating excess energy to mine digital assets and gradually building a reserve that could complement traditional foreign exchange holdings. The proposal has its theoretical merits, it offers a hedge against fiat depreciation, can attract crypto-aligned foreign direct investment, and may symbolize technological advancement. The mining of crypto through surplus energy also capitalizes on an otherwise underutilized resource, converting energy into store-of-value assets.
The model, however, is far from straightforward. The formation, management, and liquidation of a crypto-based strategic reserve entail layers of financial, operational, and legal complexities. The valuation of such reserves would be subject to market volatility, and no global central bank currently recognizes crypto holdings as sovereign reserve assets in their balance sheets under IMF’s Special Data Dissemination Standards.
The accounting of crypto reserves under international public sector accounting standards remains unresolved, creating gaps in fiscal reporting and audit transparency. The governance structure over such reserves would need to be institutionalized through legislation, oversight mechanisms, and audit pathways to ensure credibility and risk management.
The IMF’s position on holding crypto as reserves is cautious at best. The Fund’s guidance emphasizes transparency, regulatory clarity, and prudential risk frameworks before integrating crypto into sovereign financial systems. The recent staff-level visit to Pakistan in May 2025, led by Nathan Porter, focused heavily on achieving a primary surplus, sustaining monetary policy liberation, and preserving external buffers, all areas where unregulated crypto involvement could trigger policy distortions.
The IMF continues to view crypto based reserves as speculative and unsuitable for economies with narrow fiscal space and constrained reserve adequacy. The Fund’s risk assessment matrix includes the threat of reserve depletion through price shocks, cyber breaches, and valuation misreporting. Any official move to adopt crypto as strategic reserve assets without multilateral consensus could jeopardize Pakistan’s ongoing engagements under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF).
The domestic legal framework is another fundamental constraint. The Constitution and State Bank Act, 1956 treat currency issuance as a sovereign function, and the applicable law of Pakistan stipulates that money bills, including those defining currency, must originate in the National Assembly. The definition of “legal tender” remains tightly coupled with fiat norms and cannot, under present law, be expanded to include decentralized assets without statutory reform.
The Supreme Court of Pakistan could be called upon to rule on the constitutional validity of crypto-based sovereign reserves or legal tender applications, especially if challenged by stakeholders under fiscal transparency or sovereignty clauses. The clarity of the law is essential, and any executive action taken in haste will have future implications.
The broader regulatory vacuum on cryptocurrency poses multiple challenges. The lack of a central regulatory body, prudential guidelines, and compliance mechanisms allows illicit flows, investor exploitation, and fiscal leakage. The anonymity of crypto transactions presents acute risks for anti-money laundering (AML) and combating financing of terrorism (CFT) efforts.
The Financial Action Task Force (FATF) places significant weight on virtual asset service provider (VASP) regulation, requiring licensing, know your client (KYC) frameworks, transaction monitoring, and suspicious activity reporting. The consumer protection is also undeveloped, crypto exchanges in Pakistan operate in legal grey zones, leaving users without dispute resolution, insurance, or recourse mechanisms in cases of loss, fraud, or failure.
The crypto assets within Pakistan’s current legal framework are yet to be defined. The absence of statutory recognition means that tax treatment, enforceability of contracts, and property rights over digital tokens also remain undefined. The State Bank of Pakistan (SBP) continues to discourage crypto transactions through the formal banking channel. The ambiguity creates confusion for investors, enforcement agencies, and financial institutions. The federal budget for fiscal year 2025-26, to be announced on June 10, 2025, must prioritize crypto classification under securities law, tax codes, and payment systems legislation. The creation of a single-window digital asset regulatory authority could harmonize oversight and build market confidence.
The regulation of crypto mining in Pakistan should be another challenge for Pakistan. The licensing of mining farms, environmental compliance, grid integration policies, and land allocation rules must be formalized. The absence of such a regime invites regulatory capture, corruption, and environmental degradation.
The mining of Bitcoin and other proof-of-work assets requires transparency in energy allocation, public bidding, and revenue-sharing mechanisms with the state. The introduction of green mining incentives, using hydro, wind, or solar sources, can improve acceptability and environmental compliance. The inclusion of mining operations under tax law, particularly through minimum turnover or energy usage metrics, can improve fiscal gains.
The consumer protection must be secured through enforceable rights. The regulation of exchanges, custodial wallets, and initial coin offerings must include capital adequacy rules, cybersecurity standards, and public disclosure obligations.
The establishment of a crypto ombudsperson and investor grievance redressal system can prevent exploitation and build confidence. The integration of blockchain analytics, AI-based transaction monitoring, and interoperability with banking KYC data can mitigate AML and CTF threats. The education of users through certified training, awareness campaigns, and institutional investor guidelines is critical to prevent speculative bubbles and scams.
The way forward for Pakistan lies in an open, participatory, and strategic approach. The government must abandon its traditional, opaque model of decision-making and instead engage the private sector, academia, and international stakeholders in shaping crypto policy.
The Government should host a Global Crypto Summit in Islamabad to signal intent, build networks, and invite foreign capital. The invitation of leading investors, blockchain developers, and legal experts can help Pakistan leapfrog into the digital economy. The summit must include matchmaking sessions between foreign innovators and Pakistani entrepreneurs to localize innovation. The showcasing of Pakistani culture, investment climate, and talent pool can make the country a destination of choice for digital nomads and fintech startups.
The final pillar of policy must be narrative. The government must articulate its crypto strategy as a tool of empowerment, not fear. The branding of Pakistan as a peaceful, ambitious, and tech-savvy nation is essential to overcoming reputational inertia. The integration of crypto policy with Pakistan’s broader Vision 2030 goals, including digital inclusion, green energy, and export diversification, can create coherence and strategic alignment. The creation of a digital rupee or central bank digital currency, running parallel to a regulated crypto asset economy, can offer a hybrid model that respects tradition and embraces innovation.
The time for hesitation has passed. The global digital economy is moving, and Pakistan must not be left behind. The crypto revolution is not a threat; it is a tool for innovation and prosperity. The nation and its leaders must wield it wisely avoiding bureaucratic capture. Hopefully, Pakistan Crypto Council in its meeting, scheduled for June 2, 2025, will give serious considerations to suggestions made in this article and engage local experts for making its initiative a sucess.
____________________________________________________________
Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He holds LLD in tax laws with specialization in transfer pricing.
He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner. He studied journalism, English literature and law.
He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal).
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
X (formerly Twitter): DrIkramulHaq
_______________________________________________________________
Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.
His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
X (formerly Twitter): Adbul Rauf Shakoori
The recent publication, coauthored by these writes with Huzaima Bukhari is
Pakistan Tackling FATF: Challenges & Solutions, available at:
https://aacp.com.pk/book-detail/pakistan-tackling-fatf-challenges-and-solutions-35