By Ali Abbas
In the beginning, there were stones. Polished, round, and laboriously hewn, these stones became whispers of worth between neighbors and tribes.
Seashells followed, their intricate patterns as valuable as their scarcity. Humanity, ever restless, sought a way to make trade lighter, to detach value from the weight of things. Thus, gold coins shimmered into existence, their radiance a testament to civilization’s dreams.
Then came paper—an alchemy of trust and ink. A promise from kings and governments that these slips held the same worth as gold locked away. Money, once tangible and tied to the earth, became ethereal, an idea—a fiction sustained by collective belief.
Fast forward centuries, and the clinking of coins gives way to the hum of computers. Money dematerialized into binary code, a flow of zeros and ones that traversed the globe in milliseconds. And yet, even this marvel, this digital money, clung to the pillars of old systems—banks, governments, central authorities.
But there was a rebellion brewing in the quiet corners of cyberspace. It began as whispers among mathematicians, cryptographers, and dreamers. Could money exist without intermediaries? Could trust be coded? And so, in 2008, the world met Bitcoin, a digital phoenix rising from the ashes of the financial crisis. Its creator, shrouded in mystery as Satoshi Nakamoto, laid the foundation for what we now call cryptocurrencies.
Bitcoin was more than money; it was defiance, an anthem for decentralization. No longer would trust be bestowed upon banks or states. Instead, a distributed ledger, the blockchain, would carry the burden of truth. But with great freedom came profound questions. If money was an idea, what, then, was Bitcoin? Was it money? An asset? A commodity? Or something entirely new?
In Pakistan, this question echoes in courtrooms and policy debates. Cryptocurrencies defy traditional classifications. They lack the stability of currency, their value swinging like a pendulum in a storm. They are not commodities in the traditional sense, for their worth is not tied to the tangible. Yet, they are undeniably valuable in terms of securities, trading hands in millions every day.
David Fox, in his erudite treatise on money, reminds us that to be currency, an object must meet two thresholds: legality and universal acceptance. Cryptocurrencies, though revolutionary, fail this test. They are not legal tender in Pakistan, nor are they universally embraced as a medium of exchange. As courts in the US and UK have ruled, cryptocurrencies are closer to commodities than currency. They are traded not for daily necessities but for speculative gain, much like gold or silver​.
And yet, the answer is not to ban them outright. To do so would be akin to shutting the door on history itself, to stifle innovation with the chains of fear. Regulation, not prohibition, is the path forward—a truth recognized by progressive jurisdictions like the European Union and Japan.
Why regulate? The reasons are manifold. Cryptocurrencies offer financial inclusion to Pakistan’s unbanked millions. They are transparent, their transactions recorded immutably on the blockchain. They hold potential as hedges against inflation, a godsend in economies where currency values are perpetually in flux.
But regulation also addresses risks. Without oversight, cryptocurrencies can become havens for illicit activities—money laundering, tax evasion, and fraud. By bringing them into the legal fold, Pakistan can impose taxes on crypto gains, ensuring that the state benefits from this burgeoning market​.
The EU’s Markets in Crypto-Assets (MiCA) framework is a model worth emulating. It recognizes cryptocurrencies as digital assets, setting rules for exchanges, wallets, and issuers. Similarly, Japan treats cryptocurrencies as property, with strict anti-money laundering measures in place. These examples demonstrate that regulation does not stifle innovation; rather, it fosters it by providing clarity and trust​.
In contrast, countries that have chosen outright bans, like China, have seen crypto activity persist in the shadows, beyond the reach of law enforcement. Prohibition, far from solving problems, only exacerbates them.
For Pakistan, the stakes are high. Ranked third in global crypto adoption, the country’s youth are already immersed in this digital revolution. The State Bank of Pakistan’s blanket prohibition, based on a 2018 circular, has not stopped crypto trading but driven it underground. This approach not only denies the state its share of tax revenue but also leaves traders vulnerable to scams and blackmail​.
In the uncharted waters of crypto trading, Pakistani merchants often find themselves trapped in a vicious cycle of harassment and extortion at the hands of authorities. Among the central grievances is the role of the Federal Investigation Agency (FIA), whose actions have been criticized as a blatant misuse of regulatory ambiguities surrounding crypto transactions.
It is time to embrace regulation. By treating cryptocurrencies as assets rather than currency, Pakistan can create a framework that safeguards investors, generates revenue, and fosters innovation. Agencies like the SECP and PTA must collaborate to establish licensing regimes for exchanges and enforce robust KYC (Know Your Customer) protocols.
In a nut-shell, money, at its heart, is a story we tell ourselves. From stones to shells, from gold to Bitcoin, it evolves as society’s needs change. Cryptocurrencies are the next chapter in this narrative. They are not the end of money as we know it but its metamorphosis. Pakistan must not cling to old pages but turn to new ones, writing its future with foresight and courage.
Let this be the beginning—a tale of innovation tempered by wisdom, of progress guided by regulation. In this story, Pakistan can emerge not as a bystander but a leader, shaping the future of money for generations to come.
The author is a lawyer based in Islamabad.
