{"id":19447,"date":"2023-10-30T10:09:07","date_gmt":"2023-10-30T10:09:07","guid":{"rendered":"https:\/\/news.pakistaninewspaperlist.com\/cryptocurrencies-in-pakistan-a-high-tech-replacement-for-hawala-hundi\/"},"modified":"2023-10-30T10:09:07","modified_gmt":"2023-10-30T10:09:07","slug":"cryptocurrencies-in-pakistan-a-high-tech-replacement-for-hawala-hundi","status":"publish","type":"post","link":"https:\/\/pakistaninewspaperlist.com\/news\/cryptocurrencies-in-pakistan-a-high-tech-replacement-for-hawala-hundi\/","title":{"rendered":"Cryptocurrencies in Pakistan: A high-tech replacement for hawala-hundi?"},"content":{"rendered":"<p><\/p>\n<p>The new hawala\/hundi guy is stablecoins like Tether.<\/p>\n<div dir=\"auto\">\n<p>Under-invoicing <a href=\"https:\/\/www.dawn.com\/news\/1779389\">solar panels<\/a> and bags filled with cash to move dollars informally are so last century. There are more high-tech ways to remit money across borders without alerting the authorities, and one such way is through cryptocurrencies.<\/p>\n<p>The new <em>hawala\/hundi<\/em> guy is stablecoins like Tether (commonly known as USDT). Stablecoins are different from regular free-floating cryptocurrencies such as Bitcoin in that they seek to ensure price stability within the crypto-verse. Their goal is to maintain a constant value, regardless of wider crypto market fluctuations, and are often pegged to different assets such as fiat currency.<\/p>\n<p>USDT is the most popular stablecoin, and it is pegged to the value of the US dollar. So whether the dollar to PKR exchange rate is at Rs250 or Rs350, a single unit of USDT will always be worth $1.<\/p>\n<p>Locals can use rupees to buy USDT to buy Bitcoin. In this case, think of USDT as a token at a university cafeteria: you use rupees to buy a token, which you present at the buffet line to be able to purchase lunch. The token is not legal tender, i.e. you cannot use it to buy a packet of Kurkure at the local <em>khokha<\/em>, but you can use it to purchase <em>samosay<\/em> in the buffet line.<\/p>\n<p>Given the challenges of transferring foreign currency inside and outside the country, many are turning towards the ease of USDT, which, when transferred, can be converted back into fiat money.<\/p>\n<p>On one hand, the government is trying to incentivise remittances. On the other hand, IT professionals working for overseas clients bemoan the challenges of bringing home their hard-earned dollars. People are leaving the country, but the inflow of official remittances is falling. This is in part because remittances have moved towards stablecoins.<\/p>\n<figure class=\"media  sm:w-1\/2  w-full  media--right  media--embed  media--uneven\">\n<p>    <iframe class=\"nk-iframe\" onload=\"setInterval(()=&gt;{try{this.style.height=this.contentWindow.document.body.scrollHeight+'px';}catch{}}, 100)\" width=\"100%\" frameborder=\"0\" scrolling=\"no\" style=\"height:400px;position:relative\" src=\"https:\/\/www.dawn.com\/news\/card\/1784605\" sandbox=\"allow-same-origin allow-scripts allow-popups allow-modals allow-forms\"><\/iframe><\/p>\n<\/figure>\n<p>\u201cI am 100 per cent sure it is happening,\u201d says Shabbar Zaidi, former chairman of the Federal Board of Revenue. \u201cIt is a form of <em>hawala\/hundi<\/em>, with a different structure. Pakistan\u2019s potential for remittances is about $40 billion, but it is spread over small amounts,\u201d he said.<\/p>\n<p>In FY23, Pakistan <a href=\"https:\/\/www.dawn.com\/news\/1759602\">received<\/a> $27bn in remittances, down from $31.3bn in FY22. This indicates that nearly $10bn might have been diverted towards various informal channels, including stablecoins. Instead of the hassle of formal channels to send money, a person in the US can send transfer remittances in 15 minutes because it is a faster process where no physical cash changes hands.<\/p>\n<p>\u201cSome people use the business-to-business market to transact in USDT. Even when dollars were not easily available, USDT could be bought, which could then be used to trade in cryptocurrencies or be kept as a hedge,\u201d says payment expert Moiz Hussain, chief financial officer (CFO) at Neem Exponential Financial Services.<\/p>\n<p>\u201cMany companies that export, as well as freelancers for international firms, opt to be paid in stablecoins like USDT. So if you sell to a company in the US, instead of sending dollars, they convert it to USDT and send it to Pakistan,\u201d says Hussain.<\/p>\n<p>While 1 USDT is equal to $1, the PKR to USDT rate fluctuates at a premium. So if USD is trading at Rs300 in the open market, USDT could be trading at Rs305.<\/p>\n<p>\u201cUSDT mirrors USD, but crypto\u2019s fluctuations impact USDT. When the crypto\u2019s market is down, people sell crypto to liquidate their positions, which increases demand for USDT and pushes up its price. So the gap can increase from Rs5-6 to Rs8-9,\u201d Hussain explains.<\/p>\n<p>While for a lot of laypeople, the intricacies of the cryptoverse are still baffling, the adoption rate in Pakistan is one of the highest in the world, according to blockchain data platform Chainalysis, which ranked the country number eight on the <a rel=\"noopener noreferrer\" target=\"_blank\" class=\"link--external\" href=\"https:\/\/www.chainalysis.com\/blog\/2023-global-crypto-adoption-index\/\">2023 Global Crypto Adoption Index<\/a>.<\/p>\n<p>\u201cRegardless of the exchange rate, the pace at which crypto is being purchased in Pakistan continues to grow,\u201d says Zeeshan Ahmed, country general manager at Rain Financial. \u201cRemittances have moved from banking channels to crypto channels, and a lot of freelancers are being paid in it as well.\u201d<\/p>\n<p>However, the volume or percentage of informal trade being conducted in stablecoins is hard to gauge. \u201cCryptocurrency is difficult to track because of its nature. However, common sense dictates that if more people are moving abroad, but remittances are declining, then the money is being moved by some means,\u201d says Ahmed.<\/p>\n<p>His hypothesis is supported by observations in Chainalysis\u2019 <a rel=\"noopener noreferrer\" target=\"_blank\" class=\"link--external\" href=\"https:\/\/www.chainalysis.com\/blog\/central-southern-asia-cryptocurrency-adoption\/\">recent report<\/a>, which notes that a high share of activity happening in Pakistan is through peer-to-peer exchanges, common in emerging markets or countries with stricter capital controls.<\/p>\n<p>\u201cA need for wealth preservation in the face of high inflation and currency devaluation appears to be the reason many Pakistanis have turned to crypto,\u201d says the report, quoting Ahmed. Since the bulk of Pakistan\u2019s transaction volume, especially the purchase of stablecoins, takes place through informal P2P markets, it can\u2019t easily be identified on-chain, states the report.<\/p>\n<p>Over the last decade, cash in circulation has jumped from 28pc to 41pc as a percentage of bank deposits and from 22pc to 29pc as a percentage of total money, according to an article in <em><a href=\"https:\/\/www.dawn.com\/news\/1779399\">Dawn<\/a><\/em>. This means that a lot more people are walking around the country with wads of Rs5,000 notes in their pockets. Higher cash in circulation indicates an increase in the informal economy.<\/p>\n<p>When the money needs to be transited across borders, the use of USDT comes in handy. While many, even those in the upper echelons, appear to be blind to crypto, those with some tech knowledge have more enlightened ways of remaining under the radar.<\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The new hawala\/hundi guy is stablecoins like Tether. Under-invoicing solar panels and bags filled with cash to move dollars informally are so last century. There are more high-tech ways to remit money across borders without alerting the authorities, and one such way is through cryptocurrencies. The new hawala\/hundi guy is stablecoins like Tether (commonly known [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":19448,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"fifu_image_url":"https:\/\/i.dawn.com\/large\/2023\/10\/30123832ad78397.jpg?r=123911","fifu_image_alt":"","footnotes":""},"categories":[192],"tags":[],"class_list":["post-19447","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-islamabad-news"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/pakistaninewspaperlist.com\/news\/wp-json\/wp\/v2\/posts\/19447","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pakistaninewspaperlist.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/pakistaninewspaperlist.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/pakistaninewspaperlist.com\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/pakistaninewspaperlist.com\/news\/wp-json\/wp\/v2\/comments?post=19447"}],"version-history":[{"count":0,"href":"https:\/\/pakistaninewspaperlist.com\/news\/wp-json\/wp\/v2\/posts\/19447\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/pakistaninewspaperlist.com\/news\/wp-json\/wp\/v2\/media\/19448"}],"wp:attachment":[{"href":"https:\/\/pakistaninewspaperlist.com\/news\/wp-json\/wp\/v2\/media?parent=19447"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/pakistaninewspaperlist.com\/news\/wp-json\/wp\/v2\/categories?post=19447"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pakistaninewspaperlist.com\/news\/wp-json\/wp\/v2\/tags?post=19447"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}