New ‘arms race’

In an unprecedented move, Ceska Narodni Banka, the Czech Republic's central bank, has become the first to allocate five per cent of its reserves to Bitcoin. This seismic shift has sent ripples of speculation throughout the world, as central banks in Argentina, Australia, Bahrain, Brazil, Canada, Central African Republic, Estonia, Georgia, Germany, Hungary, India, Malta, Nigeria, Poland, Portugal, Russia, Singapore, South Africa, Switzerland, Turkey, and the United Arab Emirates are now openly discussing or actively exploring the possibility of adding Bitcoin to their own reserves.

Senator Cynthia Lummis has introduced the National Bitcoin Act in the US Senate. The bill mandates the treasury secretary to create a 'Strategic Bitcoin Reserve'. Under the proposal, the Treasury would be authorized to acquire up to 1 million Bitcoins over five years, aiming to secure roughly five per cent of the total Bitcoin supply.

A Bitcoin revolution is brewing in America! The Federal Reserve has given banks the green light to serve cryptocurrency customers. Arizona's Senate Committee has just approved a Strategic Bitcoin Reserve Bill. Utah's House Committee has approved a bill allowing public funds to be invested in digital assets. Lawmakers in Kentucky, California and South Dakota are poised to introduce legislation establishing Bitcoin reserves. At the same time, the Blockchain Basics Act has landed in Ohio, South Carolina, and Mississippi, hinting at a broader embrace of decentralized technologies. The Lieutenant Governor of Texas has prioritised the ‘Strategic Bitcoin Reserve’. In Illinois, a bill has been introduced to establish a 'Strategic Bitcoin Reserve'. In Indiana, a bill has been introduced to permit state pension funds to purchase Bitcoin.

Malaysia and Singapore have exempted Bitcoin from capital gains tax. Portugal stands out with a tax regime that exempts both capital gains and income tax from Bitcoin trading. The Czech Republic has also exempted long-term Bitcoin holders from tax. In Switzerland, some cantons offer zero taxes on Bitcoin holdings. Finally, the UAE has emerged as a hub for cryptocurrency activity, attracting $35 billion in investment in the sector. Imagine, the UAE now allows property purchases with Bitcoin. The UAE, Argentina and Ethiopia are mining Bitcoin using government resources.

To be sure, the arms race of the 21st century is not about weapons of mass destruction but about the control of digital currencies. The race to accumulate Bitcoin is the new geopolitical battleground, where nations vie for economic and technological advantage. The arms race of the past was about physical power; the arms race of the future is about digital power.

Remember, the arms race of the cold war was fueled by nuclear weapons. Yes, the digital age's arms race is fueled by Bitcoin. Remember, there was a time when nations stockpiled weapons. Yes, nations now plan to stockpile Bitcoin. Remember, nations competed for military superiority. Yes, today, they compete for dominance in the cryptocurrency market. Remember, nations once stockpiled weapons to deter aggression; now they are planning to stockpile Bitcoin to secure their economic future. To be certain, Bitcoin is the new currency of power.

Pakistan's future in the digital economy hangs in the balance. The State Bank must act decisively and develop a clear regulatory framework for cryptocurrencies before it's too late. The Government must stop stalling and provide clear guidelines on Bitcoin taxation immediately. The SECP must get serious about oversight and establish a licensing system for exchanges now. And, critically, the SECP must implement strong investor protection measures to combat the pervasive threat of fraud and manipulation. In this new arms race, Pakistan cannot afford to be a mere spectator.

The writer is a columnist based in Islamabad. He tweets/posts @saleemfarrukh and can be reached at: farrukh15@hotmail.com