Digital Currency vs Physical Currency in Pakistan

In Pakistan, the use of tangible cash goes back a very long way in the country’s history. But in recent years there has been a shift towards digital currency, which has led to a dispute about whether digital currency or physical currency is superior.

Cryptocurrency, which is another name for digital currency, is not yet regulated or formally recognized in the country of Pakistan. The State Bank of Pakistan (SBP) published a statement in April 2018 advising the general public against the usage of cryptocurrencies. The statement cited the possibility that cryptocurrencies might be used for unlawful activities such as the laundering of money or the funding of terrorist organizations.

Nevertheless, even if there is no official acceptance of cryptocurrencies in Pakistan, there is still some activity in the market for virtual currencies. It has been claimed that a number of cryptocurrency exchanges are currently operating in the country; nevertheless, these businesses may face difficulties in the form of banking and regulatory issues.

The Ministry of Finance of Pakistan made an announcement in March 2021 that it was mulling over the possibility of developing a new legal framework for digital assets. Such a framework may potentially open the way for a greater acceptance and usage of cryptocurrencies in the country. However, as of right now, it is unknown how this situation would evolve or whether digital currencies will become more widely recognized in Pakistan. Both of these things are open questions.

In this post, we will discuss the advantages and disadvantages of utilizing various forms of currency in Pakistan.

Digital Currency in Pakistan:

A specific kind of currency that can be used to conduct business over the internet is referred to as digital currency. The State Bank of Pakistan in Pakistan has not yet acknowledged any digital currencies as being valid forms of legal money. On the other hand, there are a significant number of people in Pakistan who make use of digital currencies such as Bitcoin, Ethereum, and Ripple for a variety of reasons.

Pros of Digital Currency in Pakistan:

Low Transaction Fees One of the most significant advantages of using digital currency is that, in comparison to using actual currency, it has far cheaper transaction fees. This is due to the fact that digital money is decentralized, which means that there is no requirement for intermediaries such as banks in order to complete transactions.

The use of digital currency is quite straightforward, and it eliminates the need for intermediaries in financial transactions carried out online. To begin making use of digital currency, all that is required of you is a connection to the internet as well as a digital wallet.

Acceptance All Over the World Because digital currency is recognized in every country on the planet, you are able to use it to conduct business beyond national boundaries. People that travel a lot will find this to be an especially helpful piece of information.

Cons of Digital Currency in Pakistan:

Since the State Bank of Pakistan has not yet acknowledged digital currencies as a form of legal tender, the federal government does not exercise any authority over these currencies because they are exempt from official oversight. People can find it more difficult to trust digital currencies as a result of this.

The value of digital currencies is known to be volatile, which implies that there is a lot of variation in the value of these currencies over time. Because of this, it may be challenging to use digital currencies as a form of value storage.

The Dangers of Cyberspace: Cyberattacks, which can result in the loss of funds, can target digital currencies because of their vulnerability. This is especially troubling in a nation like Pakistan, which is experiencing a rising tide of online criminal activity.

Physical Currency in Pakistan:

The traditional kind of currency that is utilized for transactions in Pakistan is physical currency such as banknotes and coins. Banknotes and coins are both examples of tangible currency that can be obtained from the State Bank of Pakistan.

Pros of Physical Currency in Pakistan:

Currency that is physically held and exchanged from one person to another is the most common and widespread method of payment in Pakistan. It is also the most frequently acknowledged type of payment. This indicates that people are at ease when making use of it.

Physical currency does not present any risks related to cybersecurity because it cannot be compromised by digital attacks; as a result, it is a more secure type of currency than digital money.

Physical currency is governed by the government, which also means that it is backed by the government. This is the case since physical currency is used. This gives it a higher level of reliability compared to digital currencies.

Cons of Physical Currency in Pakistan:

Carrying around physical currency might be cumbersome at times, especially if you are engaging in a number of substantial financial dealings. It is also not always easy to keep track of how much money one has available to them.

Physical currency is subject to greater transaction costs than digital currency is. This is because physical currency must be handled by a human. This is due to the fact that the processing of transactions involving actual currency requires the involvement of middlemen such as banks.

Physical currency is vulnerable to counterfeiting, which can lead to a loss of funds. This vulnerability makes physical currency susceptible to counterfeiting. This is a big cause for concern in a country like Pakistan, where smuggling and counterfeiting are already widespread issues.


In conclusion, both digital currency and physical currency have their benefits and drawbacks, but digital currency is more convenient. Physical cash is more commonly acknowledged and is supported by the government, however digital currency is more convenient and has lower transaction fees than physical currency. Digital currency is also backed by the government. In the end, it is up to the person to determine which kind of currency is most suitable for them depending on their specific requirements and personal preferences. However, it is essential to keep in mind that digital currencies are not yet acknowledged as a form of legal money in Pakistan. This means that using them carries with it the inherent risk that comes along with using any other kind of currency.

Hamza Ali
Hamza Ali
The writer is Economics student at National Defence University Islamabad.