Pakistan has appointed Chanpen “CZ” Jao, the former CEO of Binance, as an advisor to the recently established Pakistan Cryptocurrency Council — an organization that oversees the implementation of blockchain technologies and digital assets in the country. However, a concerning aspect is that Jao admitted to violating money laundering laws in 2023 and stepped down from his position as CEO of Binance.
The U.S. Department of Justice has announced charges against Jao for these violations and is seeking a 36-month prison sentence, stating that he "violated U.S. laws in an unprecedented manner" and that his "punishment should reflect the seriousness of his crimes".
At the same time, Jao was sentenced to four months in prison in California and was released in September 2024. Binance agreed to pay a fine of $4.32 billion, while Jao paid $50 million and another $50 million to the U.S. Commission.
Last week, Jao agreed to advise the Kyrgyz Republic on blockchain and cryptocurrency regulation, signing a memorandum of understanding with the national foreign investment agency. Jao, born in China, is a Canadian citizen.
Experts note that China is influencing Jao's international reputation as a leading expert in cryptocurrency and blockchain technologies, appointing him as an advisor in financially influential countries like Pakistan.
During the investigation into Jao's money laundering law violations, U.S. Department of Justice prosecutors stated that Binance welcomed criminals and failed to report over 100,000 suspicious transactions, including cases related to HAMOS, Al-Qaeda, and Islamic State terrorist groups. They also noted that Jao's exchange facilitated the sale of child sexual abuse material and fundraising through encrypted threat programs.
Pakistan appointed Jao as a "strategic advisor" to the newly established cryptocurrency council, despite his proven criminal reputation. The budget-strapped country plans to legalize cryptocurrency trading, attract international investments, and integrate blockchain technologies into its weak economy. In March 2024, British citizen Sakib was appointed as the chief advisor on cryptocurrency issues to the finance minister.
The State Bank of Pakistan has traditionally expressed caution towards cryptocurrency, based on concerns related to fraud, money laundering, and financial stability. It is worth noting that Pakistan has been placed on the "grey list" by the Financial Action Task Force (FATF) for financing terrorism and money laundering.
The country was added to this list in June 2018 for failing to comply with FATF recommendations: risk assessment, national cooperation, targeted sanctions, preventive measures, relevant checks, internal and external oversight, law enforcement, regulation, and supervision in the areas of money laundering and financing terrorism.
Thus, Pakistan's poor reputation in money laundering and financing digital terrorism is becoming increasingly uncertain and difficult to investigate as it becomes more reliant on cryptocurrency and blockchain technologies. Currently, approximately 15-20 million Pakistanis trade in digital assets. As the U.S., especially during the Trump administration, and countries like the UAE adopt cryptocurrency-friendly policies, Pakistan is striving not to fall behind global trends and to remain competitive.
It should be noted that Pakistan has taken over 20 loans from the International Monetary Fund (IMF) since 1958, the latest being approved for $7 billion in September 2024. The country is the fifth-largest debtor to the IMF. During the loan approval process, Pakistan promised that this would be the last loan, but this is likely very unlikely.
The federal government plans to integrate cryptocurrency trading into a controlled environment to generate capital gains taxes and additional revenue from trading.
Politicians in Islamabad are looking to reduce the fiscal deficit and decrease the country's dependence on external debts through a new cryptocurrency policy. Two-thirds of Pakistan's external debt is owed to China, which is firmly demanding changes in Islamabad's monetary policy and repayment of debts. Appointing Jao as an advisor on cryptocurrency strategy may be a result of Chinese influence.
Furthermore, a complex digital finance ecosystem may allow the country's military leadership and corrupt political elites to launder money through blockchain technologies. Experts also speculate that Pakistan may use cryptocurrencies to finance terrorism against neighboring countries, especially India.
In 2020-21, the volume of cryptocurrency transactions in Pakistan reached $20 billion, marking a 711% increase, making the country one of the most active cryptocurrency markets in the world. Despite this growth, the State Bank of Pakistan emphasizes the volatility, illegal use, and security issues associated with decentralized networks. The nature of decentralized operations on the blockchain is complicating oversight and raising concerns about fraud, money laundering, and financing terrorism.
These concerns highlight the difficulty of ensuring centralized oversight. Nevertheless, as a sharp turn in policy, the Pakistani government has initiated initiatives like the cryptocurrency council, demonstrating an effort to attract U.S. attention and catch up with global digital trends while circumventing unresolved regulatory issues.
Recent reports on FATF's investigations into money laundering and financing terrorism indicate that Pakistan is still facing challenges regarding many recommendations, particularly in enhanced scrutiny and oversight of non-financial businesses.
At the same time, the launch of the cryptocurrency council is being presented as an attempt to modernize the financial landscape and attract foreign investments. However, this is more of a political maneuver — an effort to showcase modernization and digital innovation without addressing unresolved issues within the AML and CFT frameworks. Prioritizing cryptocurrency initiatives without a solid regulatory foundation exposes Pakistan's financial system to the risks of money laundering and illegal financing, including drug trafficking and terrorism financing.
Moreover, appointing Jao as a "strategic advisor" — despite his criminal past — is seen as an attempt to legitimize Pakistan's efforts to digitize its economy through blockchain technologies and decentralized cryptocurrency trading. Without robust regulatory oversight, Pakistan's crypto-friendly initiatives are likely to fail and could be exploited by local and international Islamist groups for money laundering, illegal trade, and terrorism financing.
