According to Pakistan’s 2022 Virtual Asset Regulatory Framework, Pi was not included in the list of digital assets approved by the central bank’s SBP (which only includes five mainstream tokens), raising doubts about the legality of its exchange for PKR. The 2023 audit report of the SECP (Securities and Exchange Commission) clearly states that blockchain protocol assets not listed on the mainnet are all high-risk categories, and the probability of such transactions being in violation is as high as 98%. A typical case is the sudden seizure of the Karachi OTC exchange CoinMall in March 2024. Its monthly Pi/PKR trading volume reached 2.3 million US dollars, resulting in 12 operators being charged with money laundering and facing up to seven years in prison.
The compliance cost of the fiat currency channel has formed a substantive obstacle. A legal exchange must pay a deposit of 20 million PKR and obtain an EMI license (only three have been approved nationwide), but the insufficient liquidity of Pi has led to an average daily trading volume of only 14,000 PKR, far below the regulatory threshold of 100,000 US dollars. Even after completing KYC verification, a single exchange requires a 27% withholding tax (compared to 15% for Bitcoin), and the false alarm rate of the anti-money laundering system is as high as 42%. For instance, a user from Lahore, Ali Khan, exchanged 150PKR but had his account frozen for 7 days.
Cross-border payment restrictions exacerbate operational risks. The SBP sets an annual cap of $500 for residents’ cryptocurrency foreign exchange purchases, but pi to pkr‘s over-the-counter transactions often circumvent this restriction – monitoring shows that over 8,000 cross-border Pi transactions were completed through Telegram groups in 2023, with an average transaction amount of $65 per transaction. Such behavior triggers the penalty provisions of Article 19 of the Foreign Exchange Administration Act, and violators will be fined up to 2 million PKR. The underground bank in Dubai-Islamabad was caught by the FIA for using Pi to transfer funds, with the involved amount being 5.7 million. The channel fee for PKR is three times that of traditional channels.
The immaturity of technology leads to the lack of legal protection. The transaction failure rate of the Pi Network testnet in Pakistan reached 37% (due to the median network delay of 4.2 minutes), but the E-commerce Law only guarantees registered payment systems. The case of value evaporation by merchants in Multan after receiving Pi payments in 2023 shows that when the price of the Pi test coin dropped from $0.3 to $0.03, the success rate of the damaged party’s appeal was only 0.7%, as the court determined that it was “not a legal value carrier”.
The activity level of the grey market is negatively correlated with the intensity of regulation. Data from the Sindh Provincial Police shows that the case closure rate related to cryptocurrencies in the first quarter of 2024 was only 9.4%, which stimulated an 85% quarterly increase in the local Pi over-the-counter trading volume. Data from the P2P platform Paxful further shows that users from Pakistan account for 62% of the global Pi/PKR transaction volume, with an average daily spread of 23%. However, the May 2024 ruling of the Lahore High Court established a new standard: regardless of the technical form, the exchange of crypto assets in any medium must comply with the declaration process of the Anti-Terrorist Financing Regulations – this move has sharply increased the cost of underground exchange violations by 300%.