Why in the News?
The MoU signed between Pakistan’s newly created Crypto Council and World Liberty Financial Inc. (WLFI)—a company linked to the Trump family—signals a dramatic pivot by Pakistan toward digital assets, despite its economic fragility.
What are the key objectives of the Pakistan-WLFI crypto collaboration?
- Promote Financial Inclusion: Use blockchain technology to increase access to financial services across Pakistan. Eg: The Pakistan Crypto Council aims to leverage blockchain for wider economic participation despite the country’s economic challenges.
- Monetise National Assets: Utilize crypto to unlock value from untapped resources like rare earth minerals. Eg: Plans include using blockchain to help Pakistan capitalise on rare earth deposits for economic growth.
- Establish Pakistan as a Crypto Hub: Position Pakistan as a regional leader in cryptocurrency trade and stablecoin usage for remittances. Eg: The MoU with WLFI includes introducing stablecoins to facilitate trade and remittances, boosting Pakistan’s role in the regional crypto market.
Why is the Trump administration supporting cryptocurrencies in its second term?
- Reposition US as a Global Leader in Digital Assets: Trump aims to make the US a frontrunner in blockchain innovation and cryptocurrency adoption. Eg: Issued executive orders promoting a national blockchain strategy and reducing regulatory hurdles.
- Maintain US Dollar Dominance: By supporting dollar-backed stablecoins and banning central bank digital currencies (CBDCs), Trump seeks to preserve the US dollar’s global supremacy. Eg: The creation of the Strategic Bitcoin Reserve to hold government-seized crypto assets as national reserves, similar to gold.
- Encourage Crypto Industry Growth and Innovation: Trump reversed previous skepticism to foster a pro-crypto environment, appointing industry-friendly figures to key roles. Eg: Inclusion of pro-crypto leaders like Elon Musk and David Sacks and pausing enforcement actions against major exchanges like Coinbase.
How might Pakistan’s crypto ambitions affect India’s economic and security interests?
- Risk of Cross-Border Money Laundering and Terror Funding: Pakistan’s use of decentralized cryptocurrencies may facilitate untraceable financial flows that could fund terrorism and illicit activities affecting India’s security. Eg: Concerns over digital currencies being misused to fund terror networks across borders.
- Strategic Economic Competition in the Crypto Space: Pakistan’s push to become a regional crypto hub could challenge India’s position in the growing digital asset market and impact economic influence in South Asia. Eg: Pakistan’s plans to monetise national assets and promote crypto adoption with support from WLFI.
- Leverage of Diaspora and Technology for Geopolitical Influence: Pakistan is engaging its diaspora and tech entrepreneurs to strengthen ties with the US and advance its crypto ambitions, potentially shifting regional power dynamics. Eg: Appointment of a British Pakistani entrepreneur to lead crypto regulation and influence policy, signaling increased geo-economic influence via digital currencies.
When did the Indian Supreme Court raise concerns about the lack of a crypto regulatory framework?During the hearing of Shailesh Bhatt’s bail petition in early 2025: The Supreme Court highlighted the absence of a clear regulatory framework governing cryptocurrencies in India. The Court remarked on the paradox of taxing crypto assets without proper regulation. |
Way forward:
- Develop a Comprehensive Crypto Regulatory Framework: India should establish clear, balanced regulations to promote innovation, protect investors, and curb illicit activities in the crypto space.
- Enhance Cross-Border Collaboration and Monitoring: Strengthen international cooperation to monitor and prevent misuse of cryptocurrencies for money laundering and terrorism financing, while fostering responsible crypto adoption.
Mains PYQ:
[UPSC 2021] What is Cryptocurrency? How does it affect global society? Has it been affecting Indian society also?
Linkage: The growing importance of cryptocurrency, its disruptive potential in global finance, and its implications for India, specifically mentioning India’s significant number of crypto users. This PYQ demonstrates the UPSC’s interest in the fundamental understanding and societal effects of this technology.
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