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Bitcoin ban could backfire on Pakistan

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Pakistanis were third biggest crypto adopters in 2021, pumping up digital currency holdings to more than central bank’s foreign reserves

Pakistan’s central bank has proposed a ban on all forms of cryptocurrency, saying the risks involved in trading Bitcoin, Ethereum and other crypto coins far outweigh the potential benefits.

The State Bank of Pakistan’s (SBP) “risk-benefit analysis” committee, constituted under a High Court directive, recently announced that cryptocurrencies were depleting national foreign reserves and encouraging illicit financing.

The body, comprised of representatives from the Ministry of Finance, Information Technology, Pakistan Telecommunication Authority (PTA) and Security and Exchange Commission of Pakistan (SECP) recommended a complete ban on virtual currencies and other related activities in Pakistan.

India, which has the second-highest crypto holdings worldwide, is moving in the same direction and plans to ban most cryptocurrencies as part of a proposed Cryptocurrency and Regulation of Official Digital Currency Bill, likely to be debated in the parliament’s winter session. The legislation aims to establish a framework for an official digital currency to be issued by the Reserve Bank of India (RBI).

However, Pakistan does not plan to introduce its own official digital currency to replace existing digital money. Instead, authorities intend to ban all forms of crypto, with proposals on the table to block even the websites dealing in cryptocurrencies.

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The SBP committee believes a clampdown is necessary because existing laws governing electronic crimes, foreign exchange remittances and anti-money laundering lack provisions for criminalizing the misuse of cryptocurrencies.

Business leaders, blockchain experts and crypto influencers have countered with a proposal for a digital currency regulatory framework. A blanket ban, they claim, would backfire badly and further damage the economy, which is already in tatters.

Karachi Chamber of Commerce and Industry (KCCI) former president Majyd Aziz told Asia Times that the government’s mindset of imposing bans to deal with emerging risks was highly flawed. “The authorities seldom figure out the outcome to analyze the risks and benefits of such an action,” he said. “You cannot ban digital currencies before evaluating its impact on the huge investments people made in the digital economy.

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“In my opinion, there is an imperative need for an International Cryptocurrency Regulatory Authority that could run the crypto-related activities in the country. We do not need to ban crypto because the people would still invest in digital currency despite a ban,” Majyd added.

At the same time, he echoed regulators’ concerns in warning, “Greed and lust for fast bucks always result in big-time losses and I pray that cryptocurrency investment may not become another Ponzi scheme.”

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Opinion is mixed, however.

Waqar Zaka, a prominent crypto influencer with related online platforms with over four million followers, recently tweeted, “There are minds who are claiming that 20 billion dollars {had} left Pakistan because of Crypto, incorrect. When there is Hundi {system in place}, why {would} anyone want to be on {the} FATF radar? By the way, Facebook {and} YouTube ads are dragging out more dollars from a country where a majority still have no idea about crypto.”

Federation of Pakistan Chamber of Commerce & Industry (FPCCI) estimates total cryptocurrency investments in Pakistan at US$20 billion, or more than the country’s total foreign currency reserves now held by the central bank.

A FPCCI policy brief, compiled in late December, underscored the risks endemic in the lack of crypto-related legislation and other digital assets in the country. It also noted Pakistan’s trading and lending partners such as China and the International Monetary Fund (IMF) have both warned unregulated blockchain technology is susceptible to money laundering and other digital crimes.

The report also noted that the Financial Action Task Force (FATF), an intergovernmental body that fights money-laundering globally, has called on Pakistani authorities to better regulate its crypto industry, as most investors currently use a peer-to-peer (P2P) crypto investment mechanism that renders crypto assets almost undetectable.

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Chainalysis, a blockchain data platform that provides data, software, services and research analysis, reported in October last year that Pakistan recorded 711% growth in crypto-related investments during the 2020-21 fiscal year, even higher than India’s explosive 641% growth.

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The robust growth in digital currency holdings has made Pakistan one of the most robust crypto markets outside of Europe and the United States, with Chainalysis ranking the country third on its Global Crypto Adoption Index for the year 2021.

Chainalysis opined that Pakistan’s actual crypto holdings could be even higher than the official estimates because many citizens purchase bitcoin through P2P deals, which mostly remain undocumented.

Meet TripleA, a cryptocurrency and blockchain technology outfit, estimates that over 9 million people, or 4.1% of Pakistan’s total population, currently own cryptocurrencies. The firm claims that interest in Bitcoin, judging by online searches and other measures, has risen following the government’s discussion of new cryptocurrency regulations.

Meet TripleA said that despite Pakistan’s surging interest in cryptocurrency, the country’s potential was is being hampered by low banking penetration and limited proof-of-stake (POS) terminals for processing transactions and creating new blocks in a blockchain. Even so, the outfit said the bitcoin market is a “fast-growing sector of the economy.”

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Regulatory screws are already tightening on crypto-trading platforms. Last week, Pakistan’s Federal Investigation Agency (FIA) said it approached Binance Holdings Limited, one of the world’s biggest Bitcoin hubs, as part of an investigation into a suspected $100 million scam.

The agency claimed that several thousand Pakistani investors had been cheated through “fraudulent online investment mobile applications” and money transferred to at least 26 suspect Binance blockchain wallet addresses. The agency directed Binance to give the details of these blockchain accounts and mark a lien on the funds.

Soon thereafter, FIA director-general Sanaullah Abbasi said during an SBP briefing in Karachi on January 15 that the agency would soon block websites dealing in cryptocurrencies to prevent fraud and possible money laundering.

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The meeting was informed that there was no section of law available in the Prevention of Electronic Crimes Act 2016, Foreign Exchange Remittance Act 1947 (FERA) or Anti-Money Laundering Act 2010 (AMLA) to criminalize the misuse of cryptocurrency.

The meeting also observed that there was no regulatory framework for virtual asset service providers to comply with FATF requirements.

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China, Bangladesh, Saudi Arabia, Egypt, Iraq, Qatar, Oman, Morocco, Algeria and Tunisia have all already banned crypto transactions, while 42 other countries, including Algeria, Bahrain, Bolivia, India and Pakistan have implicitly banned digital currencies by restricting banks and cryptocurrency exchanges from dealing in the digital assets.

In 2018, Pakistan’s central bank declared that it had not authorized or licensed any individual or entity for the issuance, sale, purchase, exchange, or investment in virtual currencies like bitcoin and others. Digital currencies, SBP said at the time, were not a legal tender issued under the bank’s guarantee.

The SBP not only prevented banks from processing, using, trading, holding, transferring value, promoting and investing in virtual currencies but also advised them not to facilitate their account holders’ cryptocurrency transactions. Now, that regulatory noose will likely tighten into an outright crypto ban.

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Rising from the Desert: How the UAE is Shaping the Future of Crypto

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The sun-drenched sands of the United Arab Emirates are no longer solely synonymous with oil wealth and towering skyscrapers. In recent years, the UAE has emerged as a frontrunner in the global race to embrace and regulate the burgeoning world of cryptocurrencies and digital assets. With the MENA region accounting for 7.2% of global crypto transaction volumes, equating to nearly $400 billion, the UAE is at the forefront of establishing the standards that will define the future of this revolutionary technology.

From Skepticism to Embrace: A Rapidly Evolving Landscape

Just a few years ago, the UAE’s stance on cryptocurrencies was cautious, mirroring the general global uncertainty surrounding the nascent asset class. However, a forward-thinking vision and a keen understanding of the potential of this digital revolution led to a dramatic shift in approach. In 2022, Dubai established the Virtual Asset Regulatory Authority (VARA), the world’s first dedicated regulator for virtual assets. This decisive step sent a clear message: the UAE intended to not only embrace crypto but also become a global leader in shaping its development.

Building a Robust Regulatory Framework: The Cornerstone of Success

VARA’s establishment marked a turning point. Unlike many other jurisdictions grappling with a patchwork of regulations or outright bans, the UAE took a proactive approach. VARA’s comprehensive rulebook outlined clear guidelines for operating within the crypto space, addressing concerns about money laundering, market manipulation, and consumer protection. This transparent and well-defined regulatory framework instilled confidence in both investors and established financial institutions, paving the way for the UAE’s crypto ecosystem to flourish.

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A Magnet for Innovation: Fostering a Thriving Crypto Hub

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The UAE’s commitment to creating a welcoming environment for crypto businesses has attracted a diverse range of players to its shores. From established financial giants like Binance and FTX to innovative startups developing the next generation of blockchain solutions, the Dubai International Financial Centre (DIFC) and other free zones have become vibrant hubs for crypto activity. This influx of talent and expertise has fostered a collaborative and dynamic ecosystem, where innovation thrives and new ideas rapidly take shape.

Beyond Regulation: Education and Infrastructure for Sustainable Growth

The UAE’s vision extends beyond simply providing a regulatory framework. Recognizing the importance of building a knowledgeable and engaged crypto community, the government has launched numerous initiatives to educate the public about digital assets. Universities are offering specialized courses in blockchain technology, while government-backed hackathons and conferences connect entrepreneurs and investors, further fueling the ecosystem’s growth.

Challenges and Opportunities: Navigating the Uncharted Waters

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Despite its remarkable progress, the UAE’s crypto journey is still unfolding. Issues like market volatility, the potential for cybercrime, and the need for global regulatory coordination remain challenges that need to be addressed. Nevertheless, the UAE’s proactive approach and willingness to adapt position it well to overcome these hurdles. By continuously refining its regulatory framework, fostering innovation, and collaborating with international partners, the UAE can solidify its position as the preeminent global hub for responsible and sustainable crypto development.

The Ripple Effect: Shaping the Future of Global Crypto Standards

The UAE’s pioneering efforts are not confined within its borders. Its clear regulatory framework and commitment to best practices are serving as a model for other nations seeking to navigate the uncharted waters of crypto regulation. As more countries consider establishing their regulatory frameworks, the UAE’s experience and expertise are likely to be closely studied and emulated. In this way, the UAE’s leadership role in shaping the future of crypto extends far beyond its geographical boundaries, influencing the development of global standards that will impact the industry for years to come.

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Conclusion: A Beacon of Innovation in the Crypto Landscape

The UAE’s rapid rise to prominence in the world of cryptocurrencies is a testament to its forward-thinking vision and unwavering commitment to innovation. By establishing a robust regulatory framework, fostering a thriving crypto ecosystem, and actively promoting education and collaboration, the UAE has positioned itself as a leader in shaping the future of this transformative technology. As the global crypto landscape continues to evolve, the UAE’s unwavering ambition and unwavering commitment to responsible development promise to make its mark on the future of finance and reshape the way we interact with the digital world.

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Ethereum Restaking Poised to Take Center Stage in 2024 Crypto Scene

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With the dust settling around the anticipated Bitcoin ETF approval, a new contender emerges for the hottest crypto narrative of 2024: Ethereum restaking. Eyes are turning towards this innovative financial tool as analysts predict it could be the next big driver of growth in the crypto market.

What is Ethereum Restaking?

In simple terms, restaking allows investors to earn additional yield on their already staked Ethereum (ETH). Traditionally, ETH holders can stake their tokens to support the Ethereum network and earn rewards. Restaking platforms take this a step further by leveraging these staked tokens in DeFi protocols, generating even higher returns for investors.

Why is it gaining traction?

Several factors are fueling the excitement around Ethereum restaking:

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  • Increased DeFi Adoption: The explosive growth of DeFi offers new ways to utilize staked ETH, unlocking hidden earning potential. Restaking platforms bridge the gap, making participation accessible and profitable for everyone.
  • Enhanced Yields: Compared to standard staking, restaking promises amplified returns by exposing ETH to various DeFi strategies. This prospect is incredibly attractive, especially in a bear market where investors crave higher yields.
  • New CoinGecko Category: The recent addition of a dedicated “restaking token” category on CoinGecko further validates the emerging trend. This provides increased visibility and potentially attracts fresh capital to the sector.

Early Movers Gaining Momentum:

Leading restaking platforms like Pendle Finance (PENDLE) and Picasso (PICA) have already witnessed significant price surges amidst the growing hype. PENDLE alone saw a 20% jump in value within a day, demonstrating investor confidence in the market’s potential.

Not Without Risks:

Despite the optimism, it’s crucial to acknowledge the inherent risks associated with restaking. DeFi protocols involve complexities and potential security vulnerabilities. Moreover, the nascent nature of the restaking market carries additional uncertainty.

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A Promising Horizon:

While challenges remain, the potential of Ethereum restaking cannot be ignored. It offers a compelling solution for maximizing passive income on staked ETH and unlocking the power of DeFi for a broader audience. Whether it becomes the defining narrative of 2024 remains to be seen, but one thing is certain: Ethereum restaking is definitely worth watching.

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The Dark Side of Bitcoin ETFs: Why They Could Be the Next Big Threat to the Cryptocurrency Market

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Introduction

Bitcoin exchange-traded funds (ETFs) have been a hot topic in the investment world for the last few years. The idea of having a regulated investment product that tracks the price of Bitcoin, without the need to hold the cryptocurrency directly, has been appealing to many investors. However, there are also concerns and criticisms surrounding Bitcoin ETFs. Some argue that such funds could lead to market manipulation and volatility. Others question the security of such funds and the lack of transparency in the underlying assets. Despite the potential benefits, the debate around Bitcoin ETFs continues, and investors should carefully consider the pros and cons before investing in them.

Changing the Nature of Bitcoin

One of the main criticisms of Bitcoin ETFs is that they could change the nature of Bitcoin itself. Satoshi Nakamoto, the creator of Bitcoin, envisioned it as a decentralized, peer-to-peer electronic cash system. However, if Bitcoin ETFs are approved, they would introduce a centralized financial product into the market. This could compromise the freedom and security supposedly offered by Bitcoin’s decentralization.

Market Manipulation

The possibility of Bitcoin ETFs being used to manipulate the market is a concern that has been raised by the Securities and Exchange Commission (SEC) due to the potential for market manipulation in the cryptocurrency space. Although the approval of Bitcoin ETFs would bring a new level of legitimacy to the cryptocurrency market, it could also make it vulnerable to market manipulation. This could potentially hurt the entire cryptocurrency market, as investors may lose confidence in the digital currency space. As such, it is important for regulators to thoroughly consider and evaluate the potential risks before approving any Bitcoin ETFs.

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Bubble in the Cryptocurrency Market

Furthermore, some analysts believe that Bitcoin ETFs could lead to a bubble in the cryptocurrency market. If investors pour large amounts of money into Bitcoin ETFs, it could drive up the price of Bitcoin to unsustainable levels. This could lead to a crash in the market, similar to the dot-com bubble of the late 1990s.

Arguments in Favor of Bitcoin ETFs

Despite these concerns, there are also arguments in favour of Bitcoin ETFs. For example, they could make it easier for institutional investors to gain exposure to the cryptocurrency market. This could lead to increased liquidity and stability in the market.

Conclusion

As the debate around Bitcoin ETFs continues, many are weighing the potential benefits against the risks and criticisms. While such ETFs could bring more investors into the cryptocurrency market and increase liquidity, they also raise concerns about security, volatility, and the potential for market manipulation. Additionally, regulators are still grappling with how to regulate cryptocurrencies and ETFs, which adds uncertainty to the approval process. If approved, Bitcoin ETFs could have a significant impact on the market, but it remains to be seen how they will be received and whether they will meet the necessary regulatory requirements. Ultimately, investors will need to carefully evaluate the risks and potential rewards before making any decisions.

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FAQs

What is a Bitcoin ETF? 

A Bitcoin ETF is an exchange-traded fund that tracks the price of Bitcoin. It allows investors to gain exposure to the cryptocurrency market without having to purchase and store actual bitcoins.

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What are the criticisms of Bitcoin ETFs? 

One of the main criticisms of Bitcoin ETFs is that they could change the nature of Bitcoin itself. Another concern is that Bitcoin ETFs could be used to manipulate the market. Furthermore, some analysts believe that Bitcoin ETFs could lead to a bubble in the cryptocurrency market.

What are the arguments in favour of Bitcoin ETFs?

 They could make it easier for institutional investors to gain exposure to the cryptocurrency market, which could lead to increased liquidity and stability in the market 1.

When will Bitcoin ETFs be approved?

It remains to be seen whether they will be approved by regulators and how they will impact the market if they are.

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What is the difference between a Bitcoin ETF and a Bitcoin futures ETF? 

A Bitcoin ETF lets traders easily gain exposure to the biggest cryptocurrency via traditional brokerage accounts and stock markets, without needing to directly buy or sell the digital asset on a crypto exchange. Bitcoin futures ETFs, on the other hand, hold derivatives contracts whose value is tied to Bitcoin.

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