Banking on Bitcoin



Karachi generates roughly 60-70% of the countrywide revenue while being the financial hub of Asia’s fourth most populous country. And within the seedy underbelly of this ultraviolent metropolis the word bitcoin is echoing within the rages of yield hungry investors. The significance of bitcoin is far more critical than just another investment avenue but the tracks of Silk Road and Mt. Gox mega financial crime scandals must make the regulators anxious. Cybercurrencies such as bitcoin are usually safe havens for maintaining anonymity during any transaction that aids proliferating criminals towards money laundering, drug payments and other cybercrimes that are referred to as the wild west of finance on the darker side of cryptocurrencies. For this purpose New York State Department of Financial Services headed by Benjamin Lawsky has made considerable efforts to bring bitcoin transactions under the radar of law. Hardliners believes that this primarily kills the basic instinct of the original idea of having non-third-party involvement architecture, but in order to ensure circumvention of any misuse it is empirical to warrant investor protection legally.


Currently the Securities Exchange Commission of Pakistan does not have any laws pertaining to the licensing or use of cybercurrency companies operating within Pakistan but still many affluent investors are splashing stacks into this hysteria of bitcoin through vulnerable exchanges operating undercover. Most of these non-regulated trades go through a bunch of Generation-Z bitcoin dealers who can be found easily through acquaintances where you can either place an order on a phone call or whatsapp while the bitcoin wallet gets credited after a direct bank account transfer or cash-in-hand payment. These bitcoins can then be sent anonymously to any other BTC QR Code holder around the world who can use this money for drug trafficking, terrorism, corruption or funding any rogue organization without the fear of being tracked. However this is the best-case scenario, whereas there have been reports of many scams where millennials have fraudulently been ripped-off their savings after no transaction of bitcoin subsequent to sending money to these mysterious dealers. Due to this weak infrastructure of financial protection, millions of rupees have been stolen without any official reports of theft. This bemoans the need of a BitLicense in Pakistan that regulates crypto and cyber-currency dealers while bitcoin is listed and freely traded on the official exchange in the country.


The virtual currency bitcoin came into existence weeks after Lehmann Brothers collapsed, causing a spiral meltdown effect across the financial sector worldwide. In 2008 a completely anonymous coder named Satoshi Nakamoto published a concept paper titled – “Bitcoin: A Peer-to-Peer Electronic Cash System” on the cryptography mailing list at This was followed by a software which was released on Sourceforge to allow creation of a network for the first units of bitcoins to be traded as a digital currency.  Till today nobody knows who Satoshi Nakamoto really is, while considerable efforts have been made to unveil the identity of this secret coding maestro who gave the world a completely new perspective of designing a parallel economic structure embracing fully digital finance. Perhaps this was the most suitable time for such innovation to breakthrough into the mainstream as banks solely took all the blame for an infected financial system where a world without conventional banks seemed like utopia. Since then just like any other invention bitcoin has opened up branches of innovation for the financial sector. The most prominent of all has been Blockchain; a concept of storing ledger records in blocks virtually to increase transparency and eliminate unnecessary costs. Blockchain is now rapidly being integrated within the orthodox banking model, which is believed to bring many unprecedented improvements within the infrastructure of modern finance.


Bitcoin has certainly come a very long way propelling itself without being backed by a single institution, body or a country, solely determining its worth by the market forces of demand and supply. Over the course of only 8 years 1 Bitcoin has managed to be worth more than 4,100 units of US Dollar ($) (PKR 4 lac 25 thousand approx). This monetarist phenomenon has been able to turn many eyeballs towards it including top hedge funds, boutique investment firms and tier 1 banks who all have at least one bitcoin expert designatedly working within their institutions. While at the same time it has raised eyebrows of many watchdogs from around the world to jump in for investor protection ending up in either banning it completely in certain countries or regulating it with a fair-use policy.


The main factor holding back governments to regulate bitcoin is their inability to define what it actually is. While every single transaction of bitcoin is traceable the problem remains that one cannot know exactly who controls a particular BTC wallet. Still, despite of all these challenges Japan is one idyllic example of fostering a regulatory regime around cybercurrency. AirRegi, a tablet-based payment method covering 260,000 food outlets and retailers in the country has started to accept cryptocurrency while the big Japanese retailers such as Bic Camera and Recruit Lifestyle have outlined similar plans.


With an influx of online payments and transfers within Pakistan it has grown as a strong catalyst of financial inclusion within this region. The State Bank of Pakistan is well equipped with professionals who understand this fairly new concept and possess a clear ability to devise an action plan to stay ahead of the curve and design a framework for digital currency being used. It is perhaps a time to take control before we find ourselves swamped by the world’s next big bitcoin heist approaching from under our feet.