Do not ban crypto Uzair Younas

OPINION

Uzair Younus

Do not ban crypto and services catering to this new internet. This is where public blockchains and crypto assets come in, as they are We are squandering the natural crypto the foundational layer of the emerging Web 3 ecosystem. Blockchains remove the need for there to be a trusted third-party guaranteeing the sanctity of potential that exists in the country information – you do not need a central bank to issue reports on the validity Reports on January 12 indicated that the “State Bank of Pakistan and the federal government have decided to ban the use of all cryptocurrencies.” This decision seems to have been made in a report submitted to the Sindh High Court, which had a few months ago asked of transactions on the Bitcoin or Ethereum blockchain. To make this possible, blockchains rely on modern cryptography, which is why tokens issued on public blockchains are often referred to as cryptocurrencies or cryptoassets. These tokens help secure, validate, and record transactions on public blockchains. How do they do that? By helping resolve the double-spending problem: given that data on blockchains is stored in a distributed manner, the federal government to regulate cryptocurrencies in the country. you need a source of truth to validate transactions. Without this single source While it remains unclear as to what the regulatory framework will of truth, it would be easy to falsify records, and if this were to happen, trust in be, it is concerning to see that policymakers are once again reneging the entire blockchain would collapse.on their duty to pursue smart regulation that promote innovation and These crypto assets are also tradeable, much like shares in a public limentrepreneurship. ited company are. The valuation of these assets acts as a signal to developers Pakistan has one of the highest rates of crypto adoption in the and market participants about the growth and viability of the blockchain world, and while exact numbers of how many citizens have invested project. Details about these projects are publicly available, including whitepain crypto assets are not available, it is safe to argue that there are more pers articulating what the project is all about and its technological frameindividual crypto investors than stock market investors in the country. work. These flows are also traceable: the FBI leveraged publicly available data There are many reasons for this, key among them being the ease with to recover over $4 million in ransom paid by a U.S. pipeline operator.which a citizen can open a crypto wallet, the allure of exponential However, like public stock markets, crypto markets are prone to mareturns, and the way in which the global crypto industry has leveraged nipulation and scams. Pump-and-dump schemes and irrational exuberance is democratized flows of information to generate a movement of believ- not unique to the crypto market: one of the earliest recorded instances of this ers. It is therefore no surprise that almost every conversation related to is the Tulip bubble. This is the reason why countries around the world, rangmoney around the world has some mention of crypto, blockchain, and ing from India to Singapore and the United States, are pursuing regulations Web 3 technologies. that balance between risk mitigation and innovation. To do so, countries At their core, these technological changes are ushering in a new have brought together academia, technologists, investors, and policymakers internet, one that promises to be more decentralized and democratic. to have in-depth discussions about what the future of the internet is all about This promise of breaking the control of monopolistic gatekeepers and how sovereign nation states should approach this topic from a public ought to be viewed with skepticism – after all, Facebook has renamed interest perspective. The Sindh High Court’s orders should have been preitself Meta and indicated a desire to invest billions of dollars in this empted by policymakers in Pakistan. Because this was not done, an arbitrary new internet. However, the truth of the matter is that a new internet deadline on regulations was set by the courts and in the absence of clear economy is emerging around the world and tech-savvy individuals are regulations, almost $100 million of hard-earned savings were stolen through playing a fundamental role in building the technology, applications, scams, as reported in the media. But it is still not too late for the government to pursue an inclusive, collaborative policymaking approach that seeks to guard against downside risks, including those related to money-laundering and terrorism flows, while also promoting innoThe writer is vation and entrepreneurship in this space. The latter cannot happen if the state decides to ban crypto assets. In fact, doing so Director of would be a crime against innovative citizens who have educated themselves about the future of the internet and made a bet the Pakistan on it to earn a living and generate wealth for themselves and their families. A ban would also undermine the central bank’s deInitiative at the sire to develop a central bank digital currency: after all, you need the market to develop technical talent and knowhow about Atlantic Council, blockchain technology and crypto assets, and if there is a ban in place, the development of this talent base will be stunted. a Washington Detractors may argue that this is just gambling and speculation, but such points were made in the early era of the D.C.-based think internet as well. After all, many of us remember people mocking youngsters spending time on IRC and MSN Messenger and tank, and host asking the question: what is the need for all this? Those youngsters are today’s technology entrepreneurs, bringing in over of the podcast $300 million in investment to the country, making it into one of the world’s largest freelancing markets, helping diversify Pakistonomy. exports by providing information technology services to the world, and generating thousands of new economy jobs. Web 3 He tweets @ innovation is the next phase of the internet revolution, and it is the state’s duty to create an enabling environment for this secuzairyounus. tor. Without this, the innovation potential of talent that can create new jobs, grow exports, and generate wealth for society will fall by the wayside.