What does a country with chronic blackouts, a collapsing grid, and a $7 billion energy import bill want with bitcoin mining?
Apparently, Islamabad's latest obsession is to become South Asia's crypto hub. After years of wavering between banning and legalising cryptocurrencies, Pakistan is now aggressively pivoting towards digital assets. In March this year, the government established the Pakistan Crypto Council (PCC), a new regulatory body tasked with overseeing and promoting digital assets. Within just six weeks of its formation, on April 26, the PCC signed a headline-grabbing agreement with World Liberty Financial (WLF), a cryptocurrency company whose 60% ownership reportedly lies with the family of the US President, Donald Trump. The timing, just days after the Pahalgam terror attack, only added to the global unease.
Two Serious Questions
The PCC claims that this move is aimed at mobilising Pakistan's tech-savvy youth and turning the country's "energy surplus" into an asset. The idea is to channel unused electricity to power Bitcoin mining farms and AI data centres, thereby converting 'waste into wealth'. On paper, this may seem like a progressive step towards digital innovation. However, this raises two serious questions that cannot be ignored.
The first relates to the so-called energy surplus. While Pakistan may have a surplus generation capacity on record, it suffers from endemic inefficiencies, including outdated transmission and distribution (T&D) infrastructure, high line losses, and a mismatch between electricity costs and revenue. This creates a delivery deficit, even when capacity exists. In October 2023, the country reported an energy shortfall of 6,000 megawatts, despite its surplus status. This pushed Pakistan's energy import bill to a staggering $7 billion.
An Unreliable Grid
An official statement suggests that this surplus energy, which can be interpreted as the unused capacity lying within the national grid, could be diverted to power crypto mining farms. However, Pakistan's grid is notoriously unreliable. Feeding energy-intensive Bitcoin operations could deepen load-shedding for households and industries, exacerbating a crisis that already affects millions. Without fixing the underlying structural problems in the energy sector, such a move risks worsening, rather than resolving, the current dysfunction.
Some might argue that Pakistan should turn to renewables to power its crypto ambitions. It is true that the country has enormous untapped potential in solar and wind energy, but its track record is poor. Pakistan's policies until 2006 were fossil fuel-centric. Although a renewable energy policy was introduced in 2006, it has largely failed to meet its targets due to weak planning and inaccurate demand forecasting. According to a report released by the National Electric Power Regulatory Authority (NEPRA) in 2022, only 7% of Pakistan's 43,775 MW installed capacity comes from renewable sources. Betting on green energy to power crypto farms, when even basic consumer needs remain unmet, is wishful thinking at best and negligence at worst.
Where Is The Money Going?
The second, and far more troubling, concern is how a decentralised, opaque, and largely unregulated financial asset such as cryptocurrency might be used - or misused - in Pakistan. The country has repeatedly come under scrutiny for its financing practices, particularly in relation to terrorism. While crypto is not inherently illicit, its anonymity and decentralised nature make it ideal for bypassing traditional financial oversight mechanisms.
This is not a hypothetical concern. In August 2020, the US Department of Justice announced the largest-ever seizure of cryptocurrency assets tied to terrorism financing, dismantling campaigns linked to Hamas, al-Qaeda, and ISIS. In Africa, a country that's home to one of the world's fastest-growing crypto markets, policymakers have expressed concerns over its use in money laundering and illicit cross-border transactions. Even developed economies struggle to regulate the use of crypto in national security contexts.
Pakistan's financial opacity, coupled with its history of being greylisted by the Financial Action Task Force (FATF), raises uncomfortable but necessary questions: if traditional banking channels have failed to prevent the diversion of funds, what will happen when those channels are replaced by blockchain wallets accessible with just a QR code?
A New Opaque Layer
At a time when Pakistan is facing acute economic distress, struggling to provide basic public services and seeking yet another bailout from the International Monetary Fund (IMF), reports allege that approximately Rs.14 crore were allocated as compensation to UN-designated global terrorist Masood Azhar. While previous instances of financial support for terrorist-linked organisations have typically occurred within traceable financial systems, the emergence of cryptocurrencies has introduced a new layer of opacity. In the absence of a robust regulatory framework, such transactions risk moving further into the shadows, complicating efforts to monitor and prevent illicit financial flows.
India, despite being more technologically advanced and institutionally equipped, continues to exercise caution on full crypto legalisation, not because of mere bureaucratic inertia, but because it understands the full weight of what opening this Pandora's box entails. From the challenge of meeting domestic energy needs to the geopolitical risks of strengthening a Western-dominated crypto ecosystem, New Delhi has rightly treaded carefully.
In contrast, Islamabad leaps before looking. By embracing digital currency without resolving its foundational vulnerabilities in both its energy infrastructure and financial governance, Pakistan may not be catalysing a revolution, but rather courting a crisis.
(Avni Goel is a research analyst at the Chintan Research Foundation)
Disclaimer: These are the personal opinions of the author
