Illegal cryptocurrency activity drains $600 million from Pakistan

Pakistan has announced that it has suffered losses of over $600 million due to illegal cryptocurrency transactions. The country says this development has drastically reduced the inflow of dollars into the banking system, with people now preferring to buy dollars from currency exchange companies and transfer them into digital assets using illegal channels.

“Last year, in the first 10 months of the calendar year, we sold around $4 billion to banks, which declined to $3 billion in the same period this year. These vanished dollars were mostly invested in cryptocurrencies,” said Malik Bostan, chairman of the Pakistan Exchange Houses Association.

Bostan stressed that people who buy dollars from exchange companies are currently depositing those dollars into foreign currency (FCY) accounts, where they withdraw them and use illegal means to buy digital assets.

Pakistan loses $600 million in illegal cryptocurrency trading

Malik Bostan said that from January to October this year, Pakistanis were able to hold about $400 million in FCY accounts, noting that more than $600 million left the country without a trace. The State Bank of Pakistan recently issued a directive asking banks and currency exchange companies not to provide cash, pointing out that they must transfer money directly to users’ FCY accounts only for deposit purposes.

With the new directive coming into force, exchange companies are now issuing checks and transferring funds directly to users’ FCY accounts. However, Bostan pointed out that these deposited dollars will be moved from the bank’s FCY account and used to purchase digital assets. Dollar sales to banks also fell significantly in the first four months of the year, despite strict controls on Afghanistan’s borders with Iran, the report said.

According to the data, exchange companies earned $280 million in July this year ($333 million in 2024) and $163 million in August ($295 million in 2024). $186 million ($214 million in 2024) in September and $244 million ($297 million in 2024) in October. Total sales to banks during this period were approximately $1.139 billion, a decrease of approximately 23% in the first four months of 2025. Meanwhile, State Bank data showed that commercial banks’ dollar holdings increased.

Investing in crypto assets threatens efforts to save dollars

The country has been facing a severe dollar shortage for years and was on the verge of defaulting in 2023, according to reports. After receiving the IMF bailout, the government announced import restrictions in cooperation with the State Bank to reduce the trade and current account deficits. Pakistan has also launched a crackdown on illegal trade and dollar smuggling. Although illegal transactions are now regulated, new trends in crypto investing could undermine efforts to save dollars.

The Pakistani government is preparing to enter the international financial market with new bonds and enter the Chinese market with Panda bonds. Currently, the State Bank’s foreign exchange reserves are approximately $14.551 billion, and the bank expects its foreign exchange reserves to reach $17 trillion by the end of fiscal year 2026. The increase in remittance inflows has also enabled the central bank to service debt service and other obligations while maintaining foreign exchange reserves of more than $14.5 billion.

Monetary experts believe the IMF will release an expected $1.2 billion, which will further increase the State Bank of Pakistan’s reserves. Meanwhile, Pakistan continues to advance its encryption efforts. The country recently called on international cryptocurrency exchanges to apply for local licenses to operate in the country. Bilal Bin Saqib, PVARA Chairman and Minister of State for Cryptocurrency and Blockchain, said the country wants to partner with these companies to build a transparent digital financial future for Pakistan.