Illegal crypto activity drains $600 million from Pakistan

Pakistan has announced that it has lost more than $600 million to illegal crypto transactions. According to the country, the development has sharply reduced the inflow of dollars into the banking system, as people now prefer to buy dollars from exchange companies and send them into digital assets using unlawful channels.

“Last year, during the first 10 months of the calendar year, we sold banks about $4 billion, which fell to $3 billion during the same period this year. These disappeared dollars were mostly invested in crypto currencies,” said Exchange Companies Association of Pakistan Chairman Malik Bostan.

Bostan highlighted that people buying dollars from exchange companies are now depositing them in their foreign currency (FCY) accounts, where they withdraw the dollars and purchase digital assets using illegal means.

Pakistan has lost $600 million to illegal crypto transactions

Malik Bostan mentioned that from January to October of this year, Pakistanis have been able to retain about $400 million in FCY accounts, noting that more than $600 million has left the country without a trace. The State Bank of Pakistan recently issued a directive asking banks and exchange companies not to provide cash dollars, noting that they must only transfer the amount directly to the user’s FCY account for deposit purposes.

With the new directive in effect, exchange companies are now issuing cheques or directly transferring funds to the FCY accounts of their users. However, Bostan noted that these deposited dollars are then moved from the bank’s FCY accounts and used to buy digital assets. According to reports, dollar sales to banks also dropped significantly in the first four months of the year, despite close control on borders with Afghanistan and Iran.

According to data, exchange companies sold $280 million in July this year ($333 million in 2024), $163 million in August ($295 million in 2024), $186 million in September ($214 million in 2024), and $244 million in October ($297 million in 2024). Total sales to banks for that duration were around $1.139 billion, which dropped in the first four months of 2025, a decline of about 23%. Meanwhile, State Bank data showed that commercial banks’ dollar holdings increased.

Crypto investments threaten move to save dollars

According to reports, the country has faced a serious shortage of dollars for years and was close to a default in 2023. After receiving an IMF bailout, the government teamed up with the State Bank to announce restrictions on imports to reduce trade and current account deficits. Pakistan also launched a crackdown on illegal trading and dollar smuggling. While illegal trading is now under control, the new trend of crypto investments could undermine efforts to save dollars.

The Pakistani government is preparing to enter the international financial market with new bonds, as well as the Chinese market with Panda bonds. Currently, the State Bank’s foreign exchange reserves are about $14.551 billion, and the bank expects reserves to reach $17 trillion by the end of the fiscal year 2026. Higher remittance inflows have also allowed the central bank to make payments for debt servicing and other obligations while still maintaining more than $14.5 billion in reserves.

Currency experts believe the IMF will release the expected $1.2 billion, which would further boost the State Bank of Pakistan’s reserves. Meanwhile, Pakistan has continued to push forward with its crypto initiatives. The country recently called on international crypto exchanges to apply for local licenses to operate within its shores. According to Bilal bin Saqib, chairman of PVARA and minister of state for crypto and blockchain, the country wants to partner with these firms to build a transparent digital finance future in Pakistan.