Changpeng Zhao, the Chinese-born Canadian businessman and founder of Binance, the world’s largest cryptocurrency exchange, agreed to be an advisor to the Pakistan Crypto Council (PCC) in early April.
PCC, freshly minted in March, was cobbled together to create a framework for crypto in a country that had until then been notoriously suspicious of digital currencies.
Crypto Tracker
At the time, many wondered what Pakistan’s motivation was in welcoming crypto, which officials maintained was a tool to attract foreign investment. In the subsequent months and during Operation Sindoor, it became clear that the move had a strategic angle as well.Pakistan, having signed up with World Liberty Financial (WLF), a crypto company linked to US President Donald Trump’s family, was also using crypto to gain currency with the White House. That, along with carrots like a Nobel peace prize nomination for Trump, may have influenced the US’s tepid pushback on Pakistan during the conflict.
On July 9, Pakistan went all in with President Asif Ali Zardari signing an ordinance establishing the Pakistan Virtual Asset Regulatory Authority (PVARA), “an autonomous federal body empowered to license, regulate and supervise entities dealing in virtual assets (VA)”.That is quite a move for a struggling economy desperate for bailouts from the International Monetary Front (IMF), but the reality is that Pakistan is not alone in embracing crypto.The US is racing to legitimise stablecoins—a type of cryptocurrency pegged to stable assets. Almost 98% of stablecoins are tied to the dollar. India’s neighbour Bhutan has quietly built bitcoin reserves worth $1.3 billion or roughly 40% of the country’s gross domestic product (GDP), according to the Wall Street Journal . Countries like Russia, Iran and North Korea have been using it to conduct business, beyond the reach of the international sanctions regime.
For countries with a clear agenda—from attracting investment, to sidestepping sanctions, or even currying favour with the world’s elite—crypto is becoming a legit play. That has meant that from US to UAE, Singapore to Bhutan, countries have made crypto a part of their foreign and economic policy playbook. The big question: where is India in all of this?
A CONSERVATIVE PLAY
“Why does the Centre not come out with a clearcut policy on regulating cryptocurrency?”
The Supreme Court’s pointed question to Additional Solicitor General Aishwarya Bhati during a May 19 hearing encapsulates India’s prolonged struggle with digital assets. The bench, hearing a bail plea in an illegal bitcoin trade case, stated: “There is a parallel under-market for it and it can affect the economy. By regulating the cryptocurrency, you can keep an eye on the trade.”
This wasn’t the first judicial nudge. In February 2022, the apex court had similarly pressed the central government to clarify whether cryptocurrency trading was legal in India.
The repeated queries highlight a regulatory vacuum that continues to perplex the courts. India’s crypto landscape remains in what experts describe as a “state of flux” where lawsuits involving fraud get dismissed due to “a lack of legal status for cryptocurrencies in India”.
The Reserve Bank of India’s concerns about financial stability continue to shape the government’s cautious approach. The central bank fears that cryptocurrencies could undermine its control over money supply and pose risks to financial and monetary stability. This, even as the market regulator
Securities and Exchange Board of India (Sebi) has reportedly recommended that several regulators oversee trade in cryptocurrencies. The Centre has to take a clear stance, backed by a well-defined policy vision, at a time when the technology is increasingly exploited by hostile actors.
Currently, the regulatory framework consists of a flat 30% tax on capital gains and 1% tax deducted at source (TDS) on transactions above Rs 10,000, introduced in 2022. In March 2023, the finance ministry mandated all crypto exchanges operating in India to register with the Financial Intelligence Unit–India (FIU–IND).
There have been news reports that India is reconsidering its stance amid growing global acceptance, but a promised discussion paper outlining policy framework options for crypto assets —scheduled for June—has still not been floated.
Meanwhile, the use of virtual assets for terror financing has been “overall on the increase”, according to a report by the Financial Action Task Force (FATF), an intergovernmental body tracking financial crime, released this week.
A country with a history of terror financing that can easily weaponise crypto against India is plunging headlong into it. How long must India wait?
PAKISTAN’S PLANS
Pakistan’s strategy extends beyond partnerships, with the country exploring bitcoin mining using surplus energy to create a strategic bitcoin reserve. “Crypto is becoming a channel for strategic financial flows for Pakistan,” says Anirudh Suri, MD, India Internet Fund. “For countries like Pakistan, aligning crypto policy with US frameworks isn’t just diplomacy, it’s a transactional pipe to stay useful to America’s geopolitical interests.”
Suri points out that’s not positive for India by any measure: “India is trying to choke financial flows to terror groups via FATF and IMF diplomacy, and crypto could reopen that tap.”
Subimal Bhattacharjee, an independent adviser and consultant on cybersecurity, defence and technology policy, warns of the implications: “What are the impacts of rogue elements using it? How do we guard our people against that? The answer to everything is in a coherent and clear crypto policy. To put it simply, we have to make it a regulated entity.”
Following the Pahalgam terror attack, India’s FIU instructed crypto exchanges to closely monitor transactions, specifically from Jammu and Kashmir and other border regions. Exchanges were directed to scrutinise private wallets and private coins used for person-to-person transfers without blockchain visibility.
Suri notes that there may be arms within Pakistan’s government or military establishment that like open crypto channels—enabling a continued flow of funds. “For a country like Pakistan, maintaining a fluid stance on crypto allows them to either attract financial flows or pursue other strategic objectives,” he says.
BHUTAN MODEL
While Pakistan’s approach raises security concerns, Bhutan presents a different model. The Himalayan kingdom has been quietly mining bitcoin since 2020, using abundant hydropower, accumulating enormous reserves of it. The country is integrating crypto into tourism and its upcoming smart city project, and views Bitcoin not merely as a store of value but as a tool to diversify its economy.
Aditya Gowdara Shivamurthy, an associate fellow with the strategic studies programme at the think tank Observer Research Foundation, says Bhutan’s foray into bitcoin mining is driven largely by domestic economic necessity, to diversify beyond tourism and hydropower, and is meant to curb brain drain. Revenues from mining have already helped them shore up foreign reserves and fund public spending—including significant salary hikes for civil servants.
While India recognises Bhutan’s sovereign right to diversify its economy, there are worries, particularly around reduced hydropower exports, and imports of Chinese bitcoin mining equipment.
Meanwhile, companies like Adani have shown interest in setting up data centres there, and how those moves unfold could shape the long-term relationship.
GENIUS MOVES OF US
The GENIUS (Guiding and Establishing National Innovation for US Stablecoins) Act—currently pending a vote in the US House of Representatives, expected in the week of July 14—aims to set a regulatory framework for stablecoins in the country. But there are plenty of worries.
Notably, the US president made nearly $57.4 million in 2024 from his cryptocurrency company, World Liberty Financial, according to the latest disclosures. This is before Trump became president for the second time. The company has floated its own stablecoin, USD1.
There are allegations that the GENIUS law would provide even more opportunities to reward buyers of Trump’s coin with favours, including tariff exemptions, pardons and government appointments.
A case in point — before the US president’s visit to West Asia, MGX, a fund backed by Abu Dhabi, said it would make a $2 billion investment using USD1 into Binance, triggering allegations of conflict of interest.
“I wouldn’t be surprised if other countries now try to exploit this pathway to gain access or soften the stance of the US administration. Under Trump, the line between strict adherence to global norms and personal or commercial interests appears to have blurred,” says Bhattacharjee.
All of this should worry India. Observers believe US may leverage its influence within FATF to promote GENIUS, with all its loopholes, as the new global standard for crypto regulation. It is a move especially significant for Pakistan, a country previously flagged for terror financing, which could take a leaf out of the GENIUS law.
WHAT INDIA SHOULD DO
Ananya Kumar, deputy director for future of money at the GeoEconomics Center of Atlantic Council, says the biggest challenge going forward is fragmented regulation. “Crypto doesn’t really listen to borders. So it’s not really a domestic problem, it’s an international problem that everyone needs to come together on.”
But clarity in policy in India would help resolve the current uncertainty, which often undermines consumer protection, and allows legit crypto entrepreneurs—many of whom have moved operations abroad, or shut down—to work within a well-defined framework.
“Virtual digital assets or crypto assets have not been defined outside of income tax and anti-money laundering laws in India. The lack of classification under foreign exchange laws, securities laws, payments laws and goods and services tax creates critical ambiguities. This leads to uncertainty for both businesses and consumers,” says Jaideep Reddy, partner at Trilegal.
“India needs regulation around the treatment of US dollar-denominated stablecoins, because it’s also a concern of capital flight—money flowing into dollars instead of rupees,” says Kumar. “India would likely want to create some sort of threshold.”
As India’s neighbours forge ahead with comprehensive crypto strategies, the question posed by the Supreme Court becomes increasingly pressing. The choice is no longer between embracing or rejecting crypto.
