Since last year there has been a surge in discussions around cryptocurrencies and virtual assets, terms that were once controversial in Pakistan. In 2018, the country also imposed an unofficial ban on crypto transactions. What has changed now for it to find its lost glory in this part of the world to the extent that the government is now planning to tokenise $2 billion of domestic government debt? The major factor in this case is America’s loud and clear acceptance of cryptocurrencies. Dubbed as a ‘crypto’ president, Donald Trump has announced crypto- and virtual asset-friendly policies, prompting most countries to finally accept the reality and influence of this asset class. Pakistan, to its credit, has so far exercised a cautious approach when it comes to crypto/virtual asset adoption. For experts, the country’s decision to tokenise part of its debt is well-measured and much-needed in an era where digitisation is the way forward.
Tokenisation involves converting traditional financial assets such as government bonds into digital tokens recorded on a blockchain, allowing them to be bought, sold and held electronically. Experts say that in the past, if the government needed a short-term loan, they sold bills to investors at discounted rates. Investors would get paid back the full amount later to make a profit. However, this process was slow and complicated. Now, using blockchain technology (tokenisation), the process is much faster and easier. It cuts out the middlemen, makes everything transparent to prevent corruption and allows investors to get involved almost instantly. Still, it is important for authorities to have a clear understanding of what it is entering into. At present, sentiments regarding virtual assets are mixed. While some embrace it as the future currency, many are still sceptical of its viability.
For Pakistan, there is no room for experiments. It has a highly volatile economy that unfortunately cannot withstand economic shocks. We have just bounced back from a situation where we were close to bankruptcy and are now on a stabilisation trajectory. New technology does offer quick solutions to traditional problems, but it is essential to do thorough risk assessment. The current plan will help the government raise funds easily and allow a larger number of small investors to participate. As of now, Pakistan has around 40 million crypto users, according to data released by different independent surveys. Several private companies are also looking at how they can diversify their investments and whether it is financially viable to throw their hat in the stablecoin ring, essentially working on creating their own digital coins. Work on the crypto front is going at a fast pace, and we only hope that the government has a foolproof plan regarding the adoption of this relatively new asset.
