- Reports cite the increasing illegal use of stablecoins like USDT in Pakistan.
- Stablecoins are used as an alternative to hawala or hundi systems.
- Despite growing crypto adoption, remittances declined, revealing the informal use of the tokens.
Amidst the growing adoption of cryptocurrencies and stablecoins, threats and risks surrounding these assets are also ascending at a similar pace. According to the latest reports, stablecoins like Tether (USDT) are increasingly used in illegal trading and transactions in Pakistan.
Reports suggest that the cryptic nature of the stablecoins makes it difficult to track them, enabling people to trade them informally, especially using them as a means of hawala or hundi trade. According to the Foreign Exchange Management Act (FEMA), hawala and hundi systems are considered illegal in Pakistan.
While Pakistan boasts a potential $40 billion in crypto remittances, the yearly analysis indicated a massive decline. In 2022, the nation received $31.3 billion in remittances, whereas in 2023, the data revealed a significant decline, with nearly $10 billion diverted toward informal channels.
Reflecting on the crucial fact, Shabbar Zaidi, former chairman of the Federal Board of Revenue, hinted at the use of stablecoins as an alternative for hawala, citing, “It is a form of hawala/hundi with a different structure. “ He added that Pakistan’s potential for remittances is about $40 billion, but it is spread over small amounts.
The report also sheds light on the increasing adoption of cryptocurrencies in Pakistan amidst market fluctuations and high volatility. According to a Chainalysis report, Pakistan is ranked eighth in crypto adoption. Despite crypto adoption, remittances are declining, revealing the informal use of these digital tokens.
Zeeshan Ahmed, country general manager at Rain Financial, commented that the explicit discrepancy between the rising crypto accumulation and the declining remittances is evident enough to interpret that “the money is being moved by some means.”
The reports contradict a previous statement by a Bitcoin enthusiast, Salahuddin Khawaja, who pointed out stablecoins as a better option to tackle the increasing rate of informal remittances. In a tweet, reflecting on the difference between the street exchange rate and the official rate in Pakistan, he stated, “Stablecoins is a much better solution.”
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