Our crypto gamble

‘The Wall Street Journal’ recently revealed an uncomfortable entanglement of diplomacy and cryptocurrency in its report on Steve Witkoff, US President Donald Trump’s new Middle East envoy, and his son Zach Witkoff, co-founder of World Liberty Financial (WLF). While Steve courted foreign governments in his official capacity, WLF sought billions in investment for a USD-pegged stablecoin from UAE-linked funds – reportedly including outreach to Pakistan.

Although both parties deny any coordination or conflict of interest, the story highlights a broader trend: crypto ventures seeking legitimacy by aligning with political power, often in geopolitically strategic regions such as the Middle East and Pakistan.

Islamabad’s crypto push has coincided with a very public outreach to Trump-aligned figures. On February 25, 2025, Finance Minister Muhammad Aurangzeb chaired a meeting on digital assets in Islamabad with foreign delegates, including individuals described as President Trump’s advisers on cryptocurrency. Discussions focused on global crypto adoption, evolving regulatory frameworks, and alignment with US digital asset policies. Shortly thereafter, Pakistan’s nascent Crypto Council signed a letter of intent with World Liberty Financial to support the development of Pakistan’s crypto infrastructure. Weeks later, at the Bitcoin 2025 conference in Las Vegas, Pakistani officials announced a government-backed Bitcoin reserve. The sequence of events has drawn attention, even as Islamabad frames the move as a purely economic and innovation-driven initiative.

At that Las Vegas conference (May 27–29), Bilal Bin Saqib, the prime minister’s special assistant on blockchain and cryptocurrency, declared that the state would hold Bitcoin in a national wallet and had “no plans ever” to sell it. Alongside this symbolic move, the government committed to allocating 2,000MW of surplus electricity to power Bitcoin mining and AI data centres – an attempt to monetise idle capacity and attract foreign direct investment. Yet the announcement raises a fundamental question: what exactly is Pakistan trying to signal by holding Bitcoin as a sovereign asset when no central bank in the world does so?

Globally, central banks remain deeply sceptical of cryptocurrencies. Not one, whether in the US, the EU, Japan or even El Salvador, despite its legal adoption of Bitcoin, holds crypto as part of official reserves. Instead, central banks prefer highly liquid, low-volatility assets like US treasuries, gold or IMF Special Drawing Rights to maintain financial stability. Crypto, by contrast, is speculative, underregulated and prone to wild swings. For a developing economy like Pakistan, where reserves can spell the difference between solvency and crisis, embracing such volatility isn’t a bold policy; it’s reckless.

The risk is especially acute given Pakistan’s ongoing engagement with the International Monetary Fund (IMF), which has consistently cautioned against crypto entanglements by sovereigns. In 2022, the IMF warned El Salvador that adopting Bitcoin as legal tender posed threats to financial stability, fiscal integrity and consumer protection. It is implausible that the Fund would approve any programme – be it an Extended Fund Facility or standby agreement – while Pakistan holds highly volatile assets on its books or uses them to back state-linked initiatives. Even a symbolic gesture like a national wallet, absent enabling legal authority, could trigger new conditionalities in future IMF negotiations.

Supporters argue that Pakistan is merely trying to signal innovation-readiness. Yet critics note the lack of any feasibility study or structured roadmap, prompting concerns that these moves may amount to political theatre more than coherent economic planning. The plan to offer subsidised electricity to Bitcoin miners, for instance, has not been backed by any transparent pricing structure or allocation criteria. While it may be acceptable for individuals to speculate on Bitcoin, treating it like a sovereign bond or a reserve commodity is another matter entirely.

The deeper confusion lies in the legal ambiguity. Despite high-profile announcements, senior officials continue to insist that crypto remains banned until comprehensive legislation is enacted. Regulatory sandboxes and FATF-compliant pilots are being discussed, but these are no substitutes for a binding, enforceable legal regime. In the absence of clarity, the growing gulf between political messaging and policy reality risks misleading investors and eroding confidence.

Meanwhile, global regulators are drawing sharper distinctions between crypto speculation and systemic finance. In the US, the SEC classifies most tokens as unregistered securities, the CFTC treats crypto derivatives as commodities, and the Federal Reserve restricts banks from active digital asset exposure. None of these institutions treats Bitcoin or stablecoins as eligible reserve assets. The UK’s Financial Conduct Authority has proposed redemption guarantees and full-reserve backing for stablecoin issuers, but without suggesting that it would ever hold such assets itself. China, for its part, has outlawed private crypto altogether and is instead developing a centralised digital yuan. Within this regulatory context, Pakistan’s experimentation looks both isolated and risky. It also invites speculation about external influencers – whether foreign lobbyists, crypto financiers or political actors – nudging Pakistan towards policy positions far outside the global monetary mainstream.

This is not to say Pakistan should abandon crypto entirely. There is a place for regulated private-sector innovation. Blockchain-based ventures could attract investment, create jobs and offer technological advantages if developed under robust oversight and proper legal frameworks. What Pakistan must not do is confuse speculative hype with sound public finance.

It’s worth remembering how small – and compromised – the crypto market still is. Global foreign exchange markets process nearly $7.5 trillion every business day. In contrast, total daily crypto trading volume hovers around $160 billion, of which stablecoins account for over $128 billion. Even that modest activity is disproportionately exposed to illicit finance. According to Chainalysis, criminal crypto activity – including scams, ransomware and sanctions evasion – totalled $24.2 billion in 2023, a significant share relative to crypto’s size.

If Pakistan is serious about distinguishing private innovation from public recklessness, it must pay attention to these numbers. Crypto’s real value lies in entrepreneurial experimentation, not in central bank vaults.

The bottom line is clear: Pakistan cannot afford to conflate reserve management with speculative ventures. No central bank in the world holds Bitcoin as a reserve for good reason: it is volatile, politically entangled and financially unstable. If Pakistan intends to remain credible with international lenders and protect the integrity of its monetary system, it must send an unambiguous signal: crypto is not a state asset. It is the private sector’s sandbox, not the government’s vault.

The writer is former head of Citigroup’s emerging markets investments and author of ‘The Gathering Storm’.