Bitcoin News Update: Pakistan's Foreign Exchange Outflow Accelerates Amid Economic Instability and Lax Crypto Oversight

Pakistan's financial regulators are raising concerns about a significant outflow of foreign currency into unregulated cryptocurrency markets, with almost $600 million leaving the country this year through unauthorized means. This movement, fueled by individuals transferring dollars from licensed exchange companies to crypto platforms, has worsened foreign exchange losses and exposed regulatory weaknesses in a country already facing economic instability.

The Exchange Companies Association of Pakistan (ECAP) disclosed that people are buying U.S. dollars from approved exchange firms, moving them into foreign currency accounts, and then withdrawing cash to invest in cryptocurrencies via unofficial routes. This process has reduced the flow of dollars into the formal banking sector by 23%, with $600 million diverted from official channels between January and October. "

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This pattern has intensified the strain on Pakistan's foreign currency reserves, which have long been under pressure from trade imbalances and political turmoil. Dollar transactions with banks dropped to $3 billion so far this year, compared to $4 billion in the same timeframe last year, . At the same time, commercial banks' dollar reserves increased to $4.625 billion by November, indicating stricter oversight of informal transfers but also .

The State Bank of Pakistan (SBP) has issued tougher regulations, instructing banks and exchange companies to credit foreign currency transactions directly to customer accounts instead of providing cash. Nonetheless, analysts caution that this step may not completely stop the outflow,

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The currency drain is happening alongside a worldwide downturn in crypto, where the industry has

, led by a 25% drop in Bitcoin and overall market instability. Pakistan's illegal crypto dealings reflect global issues, such as and . However, in Pakistan, the problem is made worse by weak law enforcement and uncertainty about the legal status of cryptocurrencies.

International developments add further complexity.

between India and Pakistan—and his administration's shift toward Islamabad—have increased interest in using crypto for cross-border payments. Pakistan's military leaders have also shown willingness to work with U.S. crypto firms, including a rare-earth minerals agreement with Missouri-based US Strategic Metals .

As Pakistan looks to re-enter global capital markets, such as by issuing Panda Bonds in China, authorities must tread carefully. While the SBP targets raising reserves to $17 billion by fiscal year 2026, the ongoing crypto outflow highlights the fragility of a financial system still recovering from a 2023 default narrowly avoided with IMF assistance.

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