Pakistan plans to use surplus energy to mine Bitcoin and build a digital sovereign reserve. DeFi could represent a new source of income.
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Technical and economic concerns surround the plan despite its great ambition, and the results will determine the future of sovereign crypto.
In an unprecedented move in the Islamic world, Pakistan is moving towards adopting Bitcoin as a strategic asset within its economic policies, following in the footsteps of the United States, El Salvador, and the Kingdom of Bhutan. Notably, Islamabad is going further by studying the possibility of using decentralized finance (DeFi) protocols to generate returns on this digital asset.
From El Salvador to Pakistan: Bitcoin becomes a sovereign reserve
Since El Salvador announced in 2021 the adoption of Bitcoin as an official currency, the idea of forming sovereign reserves of digital currencies has gained momentum among countries. In this context, multiple models have emerged: the United States decided to convert confiscated Bitcoins from criminal cases into an official reserve, while the Kingdom of Bhutan resorted to leveraging surplus hydropower to mine the currency, accumulating the equivalent of 40% of its GDP in Bitcoin.
As for Pakistan, it has recently entered this path, after appointing earlier this year the former CEO of Binance, Changpeng Zhao (CZ), as an advisor on digital currency affairs.
This trend crystallized recently with the announcement by the minister responsible for crypto affairs, Bilal bin Saqib, during a conference in Las Vegas, of his country's intention to create a national reserve of Bitcoin.