Crypto Cold War Intensifies as Pakistan, Bhutan, and the US Take Action
In the rapidly evolving landscape of digital finance, cryptocurrency is increasingly being recognized as a strategic asset for nations worldwide. Countries ranging from Pakistan to Bhutan and the United States to the UAE are integrating crypto into their national policies. However, India finds itself in a precarious position, grappling with regulatory uncertainties that could hinder its competitive edge in this global shift.
Pakistan’s Strategic Crypto Initiatives
Pakistan is making significant strides in the cryptocurrency sector, particularly with the establishment of the Pakistan Crypto Council (PCC). This initiative gained momentum when Changpeng Zhao, the founder of Binance, agreed to provide advisory support shortly before the Pahalgam terror attack. In July, President Asif Ali Zardari signed an ordinance to create the Pakistan Virtual Asset Regulatory Authority (PVARA), which will oversee the licensing and regulation of crypto entities within the country. This move aligns with Pakistan’s efforts to strengthen its financial ties with the United States, particularly through partnerships with firms like World Liberty Financial, which is linked to former President Donald Trump. Experts suggest that Pakistan’s embrace of cryptocurrency is not merely about attracting investment but also about enhancing its geopolitical leverage, especially in its dealings with Washington. However, this strategy raises concerns for India, as it could complicate efforts to combat terror financing through international financial institutions like the FATF and IMF.
India’s Regulatory Dilemma
Despite repeated calls from the Supreme Court for clarity on its cryptocurrency policy, India remains in a state of indecision. During a recent hearing, the court questioned the government’s lack of a definitive stance on crypto regulation. The Reserve Bank of India has expressed skepticism regarding cryptocurrencies, citing potential risks to monetary stability. Meanwhile, the Securities and Exchange Board of India (SEBI) has suggested a multi-agency approach to oversight. Currently, India imposes a 30% tax on crypto gains and a 1% Tax Deducted at Source (TDS) on larger transactions, while exchanges must register with the Financial Intelligence Unit of India (FIU-IND). However, a much-anticipated discussion paper outlining a comprehensive national crypto framework has yet to be released. The rise in cryptocurrency usage for terror financing has prompted the FIU to instruct exchanges to closely monitor transactions from Jammu and Kashmir, particularly focusing on private wallets and privacy coins.
Bhutan’s Bold Bitcoin Strategy
In contrast to Pakistan’s cautious approach, Bhutan is taking a bold leap into the cryptocurrency arena. The Himalayan nation has successfully mined over $1.3 billion worth of bitcoin, which constitutes nearly 40% of its GDP, utilizing its surplus hydropower resources. This innovative strategy has allowed Bhutan to fund public spending, tourism initiatives, and even salary increases for government employees. While India supports Bhutan’s efforts to diversify its economy, there are concerns about the potential decline in hydropower exports and the country’s growing dependence on Chinese bitcoin mining technology. Companies like Adani are exploring data center opportunities in Bhutan, which could significantly influence future bilateral relations.
The U.S. and the Future of Stablecoins
In the United States, the GENIUS Act, aimed at regulating stablecoins such as USD1, is set to be voted on soon. This legislation, associated with Trump’s World Liberty Financial, has raised eyebrows due to allegations that it may facilitate political favors for investors. An Abu Dhabi-based fund has already committed $2 billion in USD1 for Binance, raising concerns among experts about the potential for countries like Pakistan to exploit regulatory loopholes to improve their standing with the U.S. cybersecurity expert Subimal Bhattacharjee cautions that such developments could undermine global financial norms under the guise of policy reform.
As India navigates this complex landscape, experts emphasize the urgency for the country to establish a clear and robust regulatory framework for cryptocurrencies. With neighboring countries advancing their crypto strategies, India risks falling behind in the global digital economy if it does not act decisively.
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