Diplomacy and Cryptocurrency: A Complicated Relationship
Recent revelations from ‘The Wall Street Journal’ have shed light on the complex interplay between international diplomacy and cryptocurrency, particularly involving Steve Witkoff, a newly appointed Middle East envoy for former President Donald Trump, and his son Zach Witkoff, co-founder of World Liberty Financial (WLF). While Steve Witkoff engaged with foreign governments in his diplomatic role, WLF was reportedly seeking substantial investments for a USD-pegged stablecoin from funds associated with the UAE, possibly extending its outreach to Pakistan. Although both parties have denied any coordination or conflicts of interest, this situation underscores a broader trend in which cryptocurrency ventures attempt to gain legitimacy by aligning themselves with political power, particularly in geopolitically significant regions such as the Middle East and South Asia.
Pakistan’s Crypto Adoption and Diplomatic Outreach
Pakistan’s recent push into cryptocurrency coincides with its increasing diplomatic engagement with figures connected to the Trump administration. On February 25, 2025, Finance Minister Muhammad Aurangzeb led a meeting in Islamabad focusing on digital assets, which included discussions with individuals described as advisers to Trump on cryptocurrency matters. Topics of conversation revolved around the global adoption of cryptocurrencies, the evolving regulatory landscape, and aligning with U.S. policies on digital assets. Soon after, Pakistan’s newly formed Crypto Council signed a letter of intent with WLF to aid in building the nation’s crypto infrastructure. This was followed by announcements at the Bitcoin 2025 conference in Las Vegas, where Pakistani officials revealed plans for a government-backed Bitcoin reserve. Despite framing these developments as economic initiatives, the circumstances have raised eyebrows.
Government Commitment to Bitcoin and Resource Allocation
During the Las Vegas conference held from May 27 to May 29, Bilal Bin Saqib, a special assistant to the Prime Minister on blockchain and cryptocurrency, announced that Pakistan would maintain Bitcoin in a national wallet with no intention of selling it. In conjunction with this symbolic gesture, the government pledged to allocate 2,000 MW of surplus electricity for Bitcoin mining and AI data centers, aiming to monetize unused capacity and attract foreign investment. However, this raises crucial questions about what message Pakistan is sending by treating Bitcoin as a sovereign asset, especially given that no central bank worldwide has taken such a step.
The Central Bank’s Stance on Cryptocurrency
Globally, central banks exhibit significant skepticism towards cryptocurrencies, with none—including those in the U.S., EU, Japan, or even El Salvador, which has adopted Bitcoin legally—holding cryptocurrencies as part of their official reserves. Instead, they prefer stable, low-volatility assets like U.S. Treasuries, gold, or IMF Special Drawing Rights to ensure financial stability. In contrast, cryptocurrencies are often viewed as speculative, poorly regulated, and subject to extreme price fluctuations. For a developing nation like Pakistan, which faces critical economic challenges, embracing such volatility could be seen as a reckless policy decision.
International Monetary Fund and the Risks of Crypto
The risks associated with Pakistan’s cryptocurrency approach are heightened by its ongoing relationship with the International Monetary Fund (IMF), which has consistently advised against sovereign involvement with cryptocurrencies. In 2022, the IMF cautioned El Salvador that adopting Bitcoin as legal tender could jeopardize financial stability, fiscal integrity, and consumer protection. It seems unlikely that the IMF would approve any financial program for Pakistan if the country holds volatile assets or uses them to support state initiatives. Even a symbolic gesture such as a national wallet, without the backing of legal authority, could complicate future negotiations with the IMF.
Criticism and Concerns Over Feasibility
While supporters posit that Pakistan is signaling its readiness for innovation, critics argue that the lack of a feasibility study or structured plan raises concerns that these initiatives may be more political posturing than genuine economic strategy. The proposal to provide subsidized electricity to Bitcoin miners, for example, lacks a transparent pricing framework or criteria for allocation. While individual speculation in Bitcoin may be acceptable, treating it as a sovereign reserve asset is a different issue altogether.
Legal Ambiguity and Regulatory Challenges
The situation is further complicated by legal ambiguity. Despite high-profile announcements, senior officials claim that cryptocurrency remains banned until comprehensive legislation is established. Discussions on regulatory sandboxes and FATF-compliant pilots are underway, but these are insufficient substitutes for a legally binding framework. The disconnect between political rhetoric and policy reality risks misleading investors and undermining trust.
The Regulatory Landscape for Cryptocurrencies
Meanwhile, global regulators are increasingly differentiating between speculative crypto activities and systemic finance. In the U.S., the SEC classifies most tokens as unregistered securities, while the CFTC regards crypto derivatives as commodities. The Federal Reserve has restricted banks from engaging in active digital asset trading. None of these institutions recognize Bitcoin or stablecoins as suitable reserve assets. The UK’s Financial Conduct Authority has suggested guarantees for stablecoin redemptions but has not indicated plans to hold such assets itself. In contrast, China has banned private cryptocurrencies and is developing a centralized digital yuan. Against this regulatory backdrop, Pakistan’s experimental approach appears isolated and fraught with risk.
The Future of Crypto in Pakistan
This is not to suggest that Pakistan should entirely abandon cryptocurrency. There is potential for regulated private-sector innovations that could drive investment, create jobs, and yield technological benefits if developed under strong oversight and appropriate legal frameworks. However, Pakistan must avoid conflating speculative enthusiasm with sound public finance.
A Cautionary Note on Crypto’s Size and Risks
It is essential to remember the relatively small size of the cryptocurrency market compared to traditional financial markets. Global foreign exchange markets handle approximately $7.5 trillion daily, while total daily crypto trading volume hovers around $160 billion, with stablecoins accounting for a significant portion. This limited activity is also vulnerable to illicit financing, with criminal activities in the crypto space amounting to $24.2 billion in 2023, a notable figure given the market’s size.
Conclusion: Protecting Financial Integrity
If Pakistan genuinely aims to differentiate between private innovation and governmental recklessness, it must heed these figures. The true value of cryptocurrency lies in fostering entrepreneurial ventures rather than being stored in central bank reserves. Ultimately, Pakistan must clearly communicate that it cannot mix reserve management with speculative activities. No central bank globally holds Bitcoin as a reserve for valid reasons: it is inherently volatile, politically entangled, and financially unstable. To maintain credibility with international financiers and protect its monetary system, Pakistan needs to send a clear message: cryptocurrencies are not state assets but rather belong in the private sector’s arena, not the government’s treasury.
