Crypto Trading: Gulf Exchange Seeks Entry Into Pakistan

KARACHI: Bahrain-based Rain Financial, a trading platform for cryptocurrencies, is persuading local regulators to issue a legal framework to formalize crypto trading in Pakistan.

talking to dawn In a recent interview, Rain Financial Country general manager Zeeshan Ahmed said that trading in crypto assets – digital currencies in which transactions are verified and recorded by a decentralized system – currently exists in a regulatory “no man’s land”. .

“There is no law that declares crypto illegal. Have the authorities noticed crypto? Yes. But issuing a statement is one thing and turning it into law is another.”

Dr. Reza Bakiro, former governor of the central bank Told The risks outweighed the gains in March using cryptocurrencies. Earlier, the central bank issued A formal notice advising the general public to be careful and refrain from trading cryptocurrencies.

“Conversations are taking place. These are big-impact decisions involving a lot of ideas and proposals,” Mr Ahmed expressed the hope that the authorities would realize the benefits of formalizing an activity that is already operating outside the regulatory purview. Is.

According to data platform website Chainalysis, Pakistanis booked profits of over $604 million in crypto trading during 2021. Pakistan is also among the top ranking countries on the Global Crypto Adoption Index. This is despite the fact that the central bank does not recognize cryptocurrencies as legal tender and as such, has not licensed any exchange to facilitate their trading.

Yet Pakistanis trade digital coins on crypto exchanges such as Binance in peer-to-peer transactions. In simple words, buyer and seller agree to trade coins on the exchange’s app, whereby the same asset goes into an escrow/frozen account. The buyer then transfers the money to the seller within a short period of time and presents the proof of payment on the trading platform to gain possession. Alternatively, one can use the hundi/hawala channel to buy or sell coins on a crypto exchange. The unregulated structure of business means that the government gets zero tax on any capital gains booked by investors.

“We believe in regular, licensed platforms. When we want to enter a market, we first involve the regulator and show it the value-added and profit (of cryptocurrencies). Unregulated markets like Pakistan face flight of capital and risks to individuals and institutions,” Mr Ahmed said.

Rain Financial was incorporated in 2017 as a crypto asset company in the sandbox of the Central Bank of Bahrain. The Federal Monetary Authority released a crypto policy framework in 2018 and the company received its license in 2019.

Mr Ahmed said the exchange is a leading crypto trading platform in the markets it already operates in. The estimated volume of crypto trading in 2021 was close to $100 billion. “Our share was $2 billion. A regional player at present, we are poised to become a global one,” he said.

Crypto enthusiasts tout digital currencies as a reliable medium of exchange, a store of value, a hedge against inflation, and a safe investment in the event of a disaster – features that are conspicuously missing from the more than 10,000 cryptocurrencies currently in existence. Huh.

Rain Financial’s bid to enter the Pakistani market could not have come at a less opportune time. Over the past six months, $2 trillion has been wiped out from the combined market capitalization of cryptocurrencies. The crash is so big that China’s Blockchain-based Services Network, a government-linked initiative to promote commercial adoption of blockchain technology, has called cryptocurrencies the biggest Ponzi scheme in the history of mankind.

Mr Ahmed said that momentary setbacks should not be considered as the final verdict of history. The ongoing development of cryptocurrencies, in his view, is a resultant event in the form of the Industrial Revolution.

“This volatility looks excessive in the short term, but it is not. The global (crypto) adoption (rate) is only seven per cent,” he said, noting that the volatility will subside in the long run.

Mr Ahmed expects that Pakistan will be a high-volume, low-transaction market for Rain Financial once regulators allow formal trading of cryptocurrencies. Nearly 2 million Pakistanis have downloaded apps for crypto exchanges so far. He added that this number will increase fourfold once the authorities give legal cover to cryptocurrencies.

“Within a year (of trading formalities), I expect 70-80 million Pakistanis to trade $7-10 worth of crypto assets in a month,” he said.

Published in Dawn, July 13, 2022