Between Hype and Hardship: Pakistan’s Crypto Dilemma

Pakistan aspires to technological sovereignty. However, these ambitions face significant economic and political challenges, including low living standards and a protracted conflict with India, which controls the headwaters of key rivers. Coinpaper looked into how the Islamic republic, with great human potential, is trying to build a digital future amidst instability. First Steps Into the Digital Economy Pakistan, a country with a population of over 255 million people, is actively embracing digital technologies. In recent years, there has been a growing interest in cryptocurrencies and artificial intelligence. Young people, especially in big cities like Karachi and Lahore, are increasingly using blockchain applications and participating in cryptocurrency trading. It’s not just a trend—for many, it’s a way to protect themselves from financial instability. Above all, digital assets are an attractive tool for preserving and growing capital amid high inflation of the Pakistani rupee. For the young, technologically literate population, cryptocurrencies have also become a tool for cross-border transfers and earning money. However, not all Pakistanis can afford high-speed internet. According to projections for 2025, only 45.7% of the population has a stable connection, and rural areas are often left out of coverage altogether. This noticeably slows down the mass adoption of digital currencies. Cryptocurrency Paradox The situation with cryptocurrencies in Pakistan is a classic example of the conflict between the government and the population. Right now, digital assets are in a gray area. In 2022, Pakistani authorities considered banning cryptocurrencies and planned to block digital asset-related websites. At the same time, the State Bank announced the launch of a central bank digital currency (CBDC) by 2025. Despite this, the country has one of the highest adoption rates of digital assets in the world. Thanks to the activity of retail investors, Pakistan is among the top ten global leaders in adoption in 2024, according to data from Chainalysis. Analysts are also predicting further rapid growth, with the number of crypto users in the country expected to exceed 27 million by the end of 2025 and industry revenue expected to reach $1.6 billion. Dreams of Bitcoin Mining and State Reserves In 2021, Khyber Pakhtunkhwa province announced plans to build state-owned farms to mine digital gold. The idea was to use cheap hydropower to replenish the treasury. The initiative stalled until 2025, when the head of the Cryptocurrency Board, Bilal bin Saqib, announced plans to divert surplus electricity to bitcoin mining and to power data centers for the artificial intelligence sector. It was later revealed to local media that the Pakistani government will allocate 2 GW for these purposes. The focus is on utilizing surplus resources from renewable sources—hydro, wind, and solar energy. This is an example of a balanced environmental agenda without Luddism: the country is not afraid of technology but seeks to minimize harm to nature. Soon after, Saqib announced the creation of a national reserve in digital gold. These intentions, as well as the country’s other moves into cryptocurrencies and artificial intelligence, caused concerns from the International Monetary Fund (IMF). Pakistan has announced ambitious plans to utilize surplus renewable energy for mining and a bitcoin fund. However, the practical implementation of these initiatives requires a clear legal framework. At the moment, such a legal framework has not yet been developed in the country, which is the main obstacle on the way to the goal. Digital Silk Road Pakistan’s technological leap would not have been possible without China. Beijing is Islamabad’s main partner, and this cooperation goes far beyond politics. It is embedded in the China-Pakistan Economic Corridor (CPEC) megaproject. Key areas of support: Infrastructure: Chinese companies are actively involved in laying fiber optic cables. One example is the PEACE (Pakistan & East Africa Connecting Europe) undersea cable project, which reduces Pakistan’s dependence on existing communication lines and directly connects it to partner countries. Artificial intelligence and surveillance: China is helping to implement Safe City systems in Islamabad, Lahore, and other megacities. These are comprehensive platforms with thousands of cameras and AI algorithms for facial recognition and behavioral analysis. 5G connectivity: Chinese giants Huawei and ZTE are the main contractors in testing and deploying fifth-generation networks in Pakistan. For China, a technologically advanced and stable Pakistan is a security guarantee for its CPEC investment and a key node in the ”One Belt, One Road” initiative. Internet Under Control The World Wide Web in Pakistan is tightly regulated, but the methods are different from China’s. While ”The Great Firewall of China” is a sophisticated, proactive content filtering system, Pakistan’s approach is reactive and crude. The main regulator is the Pakistan Telecommunication Authority (PTA). Its toolkit includes: Platform blocking: Authorities have not hesitated to block access to YouTube, TikTok, Wikipedia, and most recently Social Network X at the national level. The blockages are spotty and temporary in nature. Shutdowns: During political protests or unrest, the government routinely shuts down mobile internet across the country or in specific regions. This is considered an effective measure to combat the coordination of protesters. Slowing down traffic (throttling): Reducing the speed of access to certain resources to make their use uncomfortable. Such techniques directly damage the digital economy, but authorities believe they are justified to maintain control. India’s Water Leverage Pakistan’s main vulnerability is access to water. The country is critically dependent on rivers originating in Indian territory or in Indian-controlled Kashmir. It is a legacy of the partition of British India that New Delhi uses as powerful leverage. The relationship is governed by the Indus Waters Treaty of 1960. According to it, Pakistan receives the flow of ”western” rivers (Indus, Jhelam, Chenab) and India receives the flow of ”eastern” rivers (Ravi, Beas, Sutlej). However, India has the right to build hydropower plants on ”Pakistani” rivers. Another escalation of the Kashmir conflict that began in April 2025 has once again highlighted this vulnerability. In response to the escalation, India restricted the flow of water in the Chenab and Jhelam rivers used by Pakistan for agriculture and power generation. Such actions allow India to exert direct economic pressure on its neighbors. In this context, technology development becomes a matter of survival. Artificial intelligence is already being used to optimize water consumption in agriculture, and the shift to alternative energy sources, including hydroelectric mining, is reducing the critical dependence on rivers controlled by India. Economic Realism and the Key to the Future To understand whether Pakistan’s plans for digitalization and cryptocurrencies are realistic, it’s worth looking at economic indicators. The average income in the country is $1,824 per year—an extremely low level by global standards. So buying, for example, mining equipment for the vast majority of Pakistanis remains an impossible task. This figure explains everything: why the population is fleeing to cryptocurrencies out of poverty, why the government cannot finance its own IT projects, and why the country is so heavily dependent on Chinese loans and technology. Talk of building sophisticated AI ecosystems or buying bitcoin for government reserves seems disconnected from reality, where basic needs for millions of people remain unmet. Pakistan is at a crossroads. On the one hand, there is huge human capital, interest in digital finance, and support from China. On the other, there is chaotic regulation, poverty, and constant conflicts with India. The country will have to find a balance between ambition and reality. If plans for a bitcoin reserve and mining come to fruition, it could set an example for other developing countries. But without addressing basic problems—from internet access to energy stability—such projects run the risk of remaining on paper. This path is fraught with risks, from digital authoritarianism to economic isolation in case of failure. But for the country, such a technological leap could be a chance for a better future.

Source: Coinpaper