New Delhi: The recent Pakistan-El Salvador Bitcoin deal has raised serious concerns as it shows that the adoption of cryptocurrency can allow emerging economies to bypass IMF oversight at a time when money laundering and terror financing are posing a major problem worldwide, an article said.
The collaboration between Pakistan and El Salvador emerges at a critical juncture when both states operate under IMF programmes while at the same time pursuing cryptocurrency strategies that directly contravene IMF guidance.
Having narrowly averted default in 2023, Pakistan faces steep financing requirements, with the IMF estimating the country will need more than $100 billion in external funding till 2029.
Pakistan’s $7 billion IMF agreement runs till 2027, and though the IMF restricts state-level digital asset purchases, Islamabad has allocated 2,000 megawatts of surplus electricity for Bitcoin mining and announced plans to create a Strategic Bitcoin Reserve, according to an article by Victoria Jones in ‘FIPF’ (Foreign Policy in Focus).
El Salvador, meanwhile, despite receiving its own pressure from the IMF to stop using public funds for Bitcoin purchases, continues expanding its publicly disclosed reserve of over 6,200 BTC valued at approximately $745 million.
The two countries’ rejection of IMF guidance reflects a shared resistance to multilateral financial authority that mirrors wider geopolitical trends toward multipolarity and diminishing Western influence in global economic structures.
A growing pattern of cryptocurrency adoption by sovereign states could therefore, in theory, ultimately erode the dollar-dominated international monetary system and reduce IMF influence over member countries’ fiscal policies, the article states.
It also raises corruption concerns and illicit finance risks linked to government cryptocurrency adoption in countries with weak institutional oversight may pose threats to both domestic stability and international financial security.
The fact that Bitcoin is pseudonymous in nature, along with Pakistan’s history of governance issues in particular, could open opportunities for money laundering and tax evasion, the article adds.
Pakistan’s current pivot towards cryptocurrency marks a significant shift from its previous stance on the matter. As recently as 2018, the State Bank of Pakistan declared that digital currencies were not legal tender and prohibited exchange companies from facilitating cryptocurrency transactions, the article points out.
It also underlines that Pakistan’s Finance Minister Muhammad Aurangzeb, and Bitcoin advocate Michael Saylor, whose firm MicroStrategy maintains Bitcoin reserves exceeding $62 billion, held high-profile discussions in June regarding how Pakistan can use crypto to build financial resilience. The involvement of private sector partners introduces concerning dependencies that make profit a key driving motivator, which means a weakening of effective governance and distortion of development priorities, the article states.
The article further highlights that Pakistan’s nod to President Donald Trump in its Bitcoin strategies provides insight into some of the geopolitical aspects of this push.
Two months ago, an agreement was signed between the Pakistan Crypto Council and the Trump family’s World Liberty Financial to accelerate blockchain adoption in Pakistan, in what appears to be a gesture designed as yet another exercise in strategic positioning to curry favour with the U.S. president.
This comes within the context of World Liberty Financial co-founder Zach Witkoff, the son of Trump’s Special Envoy to the Middle East Steve Witkoff, securing direct access to high-ranking officials in Pakistan, including army chief Asim Munir and Prime Minister Shehbaz Sharif in April, which clearly raises major red flags surrounding conflicts of interest, the article adds.
(IANS)
