Macro Bites

Macro Bite # 79

2 min read
 Last week, a committee constituted by the Sindh High Court recommended a ban on all cryptocurrency-related activities in the country. The committee included representatives from the State Bank, SECP, PTA, and the Ministry of Information Technology, so it is likely that such a ban may come into effect sometime soon.
The committee argued that a ban is necessary considering the speculative nature of crypto investments and the potential that carries for people to lose money. Additionally, they claimed that cryptocurrency trading can lead to foreign exchange leaving the country and facilitate trade in illicit funds.
There are undoubtedly some good reasons to regulate cryptocurrencies, as evidenced by Pakistanis losing PKR 18 billion in a crypto scam recently. However, the committee’s arguments to institute a ban on all crypto trading don’t hold up under scrutiny. For one, speculative market trading takes places at PSX all the time, and also carries the potential for people to lose money, yet it is legally permitted. Second, does cryptocurrency trading actually hurt our exchange rate? If anything, investing in crypto offers an alternative to stockpiling US dollars as investment, thus potentially reducing the demand for USD in Pakistan. Finally, trade of illicit funds is a risk in any kind of banking or funds-transfer mechanism, but surely the solution lies in better regulation than an out-right ban.
What the future holds for cryptocurrencies remains to be seen. But, at a time when central banks in other countries are exploring their own digital currencies and assets, instituting a ban seems quite a short-sighted move.

Have you invested in cryptocurrencies? Do you think they should be banned in Pakistan? Respond to this email and let me know your thoughts.

WEEKLY DATA WATCH

KSE-100 fell this week, due to Covid cases increasing significantly in Pakistan. PKR depreciated slightly this week, as rising international oil prices put pressure on the country’s import bill.

The annual change in Sensitive Price Index fell to 19.36% vs. 19.82% last week. The poorest of the country (Q1) were disproportionately affected with a change of 20.85% vs. 19.61% for Q5. On a weekly basis, prices fell for all quintiles by 0.06%.

What Else We’re Reading (Local)

  • The tragedy in Murree earlier this month highlighted how the tourism industry in Pakistan needs to be far more sustainable and well-planned. (Profit)
  • Price hikes and shortages of urea fertiliser have hit farmers at a crucial moment in the wheat season. Is hoarding to blame, or panic buying? (Dawn)

What Else We’re Reading (International)

  • The Pakistani government claims that its plans to build a new city on the banks of the River Ravi are rooted in environmental and social regeneration, but critics view the project as a land grab. (Bloomberg)
  • Pressure is building on Jack Ma’s Ant Group, as it becomes increasingly clear that Ma has fallen out with Xi Jinping and the Chinese government. (FT)

Asad Pabani

Journalist, researcher and documentary filmmaker. Prior works featured in Dawn, Soch Videos and Pioneers Post.

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