Senate committee flags crypto misuse for terror financing, capital flight

The Senate Standing Committee on Finance has raised serious concerns about the misuse of cryptocurrencies for illegal activities such as hawala, hundi, kidnappings, and terror financing. 

During the committee’s meeting on Wednesday, co-chaired by Senators Saleem Mandviwalla and Muhammad Abdul Qadir, participants discussed growing concerns around the use of crypto for criminal activities.

Senator Mohsin Aziz highlighted that kidnappers now demand ransom in gold or crypto instead of cash, adding that banned organizations in Sindh and Khyber Pakhtunkhwa (KP) were also using digital currencies to secure foreign funding.

Dr. Inayat Hussain, Executive Director of the State Bank of Pakistan (SBP), shared that the central bank was considering two options: either banning cryptocurrencies outright or regulating them. He noted that younger generations have greater engagement with digital assets, which complicates the decision.

Senator Dilawar Khan questioned the potential benefits of cryptocurrency regulation on Pakistan’s economy, suggesting that reducing tax rates could be more effective in boosting revenue.

The committee continued discussions on the Virtual Assets Bill 2025, which aims to regulate digital currencies and combat money laundering and terror financing. After a detailed review of the draft bill, the committee indicated that the final version would likely be approved in the upcoming meeting.

Finance Secretary Imdad Ullah Bosal explained that the primary goal of the bill is to regulate virtual assets, enhance transparency, and prevent illicit financial flows, not to increase tax revenue or affect loans.

Mandviwalla emphasized the urgent need for regulation, noting that cryptocurrencies are already facilitating capital flight through informal channels. Finance ministry officials confirmed that while Pakistan ranks among the top 10 countries for virtual asset investment, the lack of regulation has left the sector in a “grey area.”

The committee’s discussions highlight the growing urgency for regulation in Pakistan’s cryptocurrency market, as the sector continues to evolve and pose new challenges for financial oversight.