KARACHI: Researchers and traders have advised investors in Pakistan to avoid investing or at least further investing in the cryptocurrencies and adapt wait-and-see policy till the State Bank of Pakistan (SBP) finalises its regulations in this regard.
The warning came amid a massive slump in the value of Bitcoin, the biggest and most popular cryptocurrency, as it plunged 14pc on Wednesday to its lowest since late January. Another investment vehicle, a relatively less popular currency, Ethereum, went through its 28pc tumble on Wednesday.
Wednesday’s declines in these cryptocurrencies were their biggest daily percentage moves in more than a year as investors rushed to exit trades preferring to return to traditional markets such as stocks and bonds.
Despite a ban by Pakistan’s central bank, a large number of Pakistanis individuals and institutions have invested in cryptocurrencies.
“Stay away from it,” Khurram Schezad, CEO Alpha Beta Core, an investment advisory and research firm said while advising investors to be very cautious in such high risk area of investment. “Don’t go into it unless you fully understand it, it is very speculative and may lead to heavy losses.”
The latest reason for the fall and panic among the investors was a statement by Chinese financial industry groups on Tuesday banning institutions from offering cryptocurrency registration, trading, clearing, and settlement.
Earlier reason that bitcoin had been under pressure for almost a week after a series of tweets from Tesla’s chief Elon Musk, a major cryptocurrency backer, after reversal on Tesla accepting bitcoin as payment.
The Correspondent approached the State Bank of Pakistan for its comments regarding the trade of such currency, however, there was no response by the time this report was filed.
Researchers said, there are many setbacks for investment in such currencies. Firstly, people are forced to use unregulated platforms where they have little investor protection.
Secondly, it allegedly encourages growth in hawala/money laundering by providing those operators with customers who are attracted to this asset class. And that is the regulatory side; it robs the state of potential tax income from these transactions.
Fourthly, it prevents potential investment into Pakistan from large, regulated financial companies that are operating in the crypto economy.