Just like different currencies can be bought on at currency exchangers, cryptocurrencies can be purchased from dedicated digital currency exchanges or physical cryptocurrency ATMs. The largest cryptocurrency exchange in the United States by trading volume is Coinbase which offers users the facility to purchase digital currencies through its application. Lately, a few brokerage firms have begun offering cryptocurrency exchange services as well.
Tracing the history of Bitcoin in Pakistan; its regulation and future
Robinhood, an application that helps retail investors pour money in stock market, has also started offering cryptocurrency exchange services and users can freely trade select cryptocurrencies on the application. Since cryptocurrencies do not exist in physical forms, they are stored in digital wallets called coin wallets which are quite similar to digital bank accounts.
These wallets offer the facility to store and exchange cryptocurrencies as well as to convert them to cash. The amount of cryptocurrencies available in the market depends on its mining.
The Bitcoin Mining Industry In Pakistan
Mining, with regard to digital currencies, is a technique of using advanced computers to produce more cryptocurrencies and add it to the ledger or blockchain. Mining helps regulate the prices of cryptocurrencies because it is the supply mechanism of digital currencies while demand is generated from the general public.
In order to keep track of past transactions without a trusted intermediary, most cryptocurrencies rely on an automatic process to achieve consensus among a majority of participants, according to a World Bank report on digital currencies and blockchain. This is achieved by letting participants use their compute power to solve a difficult puzzle, the solution of which is impossible to find analytically and can only be reached through trial and error. The first person that solves the puzzle can add a block of new transactions to the chain of existing transactions and broadcast the new block to the network, so that all participants can update the blockchain in their own copy.
Although the puzzle is difficult to solve, its solution is easy to verify, allowing the nodes in a cryptocurrency network to easily determine if a proposed block is valid and should be added to the chain. Even if a node goes offline for a period of time, the network is not jeopardised. When the node goes back online, it accepts the longest valid chain as the correct one. According to the WB report, if honest participants own most of the computer power, the expectation is that they will create the longest chain, as the probability that they add new blocks is proportional to their computer power.
As a result, the longest chain can be considered the consensus view. If a dishonest participant adds a block that is not accepted by others in the chain, that block will not become part of the longest chain, because the participant will not have enough computer power to add more blocks to the chain quickly enough. The difficulty of the puzzle is adjusted regularly — every two weeks for Bitcoin in order to create about one block per 10 minutes.
How Bitcoin Works?
Limiting the addition of a new block to the blockchain to one every 10 minutes prevents the network from being overwhelmed and keeps the size of the blockchain manageable. Competition for the right to add a block to the blockchain also solved the problem of the creation of new electronic coins, the WB report explains.
People who solve the puzzle receive a combination of newly minted coins and transaction fees. This is because money can freely move in and out of Pakistan through cryptocurrency trade and it will be difficult to keep a track of each and every transaction.
Missing out on the crypto revolution
The official pointed out that cryptocurrencies were also prone to massive fluctuations hence regulators will face problems in controlling the buying and selling price if their trade is allowed. Mehanti added that the State Bank of Pakistan has a Foreign Exchange Manual and all trade in the foreign currencies should adhere by rules of the manual.
He voiced fear that trade in digital currencies break some of those rules.
On the other hand, Alpha Beta Core Managing Director Farhan Bashir Khan assumed a softer stance for cryptocurrencies and supported their regularisation at a smaller level. A distributed ledger is a database that is shared and synchronised across multiple institutions and in case of cryptocurrencies, these institutions are countries of the world. He added that global institutions such as Mastercard were moving towards decentralisation of cryptocurrencies however in Pakistan, only SBP could grant a licence for trade of digital currencies.
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He said that different countries have assumed different positions on cryptocurrencies and while some governments are actively investing in it, others have imposed a total ban on its trade. Talking about the regulatory side, he was of the view that citizens of Pakistan should be allowed to trade cryptocurrencies at a smaller level if global trade posed severe issues for the country.
Besides, approval of digital currencies on the local level will discourage cash economy, which is one of the major aims of the State Bank after Covid surfaced in Pakistan. Farhan voiced fear that if Pakistan failed to approve cryptocurrencies timely, then confusion will persist among masses and they will become vulnerable to scams and frauds. New technologies are used to exploit people and criminals have begun scamming Pakistanis under shady cryptocurrency investment schemes, he said.
He emphasised that the central bank or prominent financial sector institutions should work to create awareness regarding it. Pakistan has low penetration of insurance and mutual funds and this is a highly complicated technology hence awareness is needed at a large scale. An official from the financial sector of Pakistan, on the condition of anonymity, highlighted that Pakistan had a lofty unbanked population that wants to make only cash transactions.
He pointed out that most people of the country do not understand the mode of payment through QR codes and stressed that Pakistan would have to make stringent efforts to promote use of cryptocurrencies if they get a go ahead from the State Bank of Pakistan.
He added that there will be problems related to privacy of cryptocurrencies highlighting that Pakistan would need to create a highly secure and updated ecosystem to adopt them. The blockchain technology will significantly boost the speed and efficiency of remittances from Malaysia to Pakistan. Pakistan adopts blockchain technology to attract remittances KARACHI : Pakistan has deployed for the first time the blockchain technology in the banking sector to attract worker remittances from Malaysia, which is a step in the direction defined by the Financial Action Task Force FATF to combat terror financing and money laundering.
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It has come to the notice of Securities and Exchange Commission of Pakistan SECP that some persons, companies or entities are offering investment in cryptocurrencies such as Bitcoin, Swisscoin, OneCoin and such other virtual or digital currencies. The public is hereby advised to exercise extreme caution with respect to digital cryptocurrencies as a vehicle of investments. Please be informed that none of the persons, companies or entities promoting cryptocurrencies has been recognized or authorized by SECP or by other regulatory agencies in Pakistan to receive deposits from the public or to provide any investment or other financial services in or from Pakistan.
The public should also be aware that any investment opportunities promoted by these persons, companies or entities are risky or can be a fraudulent pyramid scheme.