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The digital economy


September 7, 2017

A systematic digital evolution and transformation has changed the technological and economic landscape of many countries, which have embraced the new frontiers with an open mind and evolved their regulatory policies to facilitate and encourage new technologies.

The positive economic impact on the GDP of adopting new technologies can be gauged from reports published by the World Economic Forum (Global Competitiveness Report) and other such agencies. Many of the new disruptive technologies that have expanded the digital economy and presented new opportunities to those with the right skills, including internet of things (IoT), mobile application development, big data analytics, artificial intelligence etc. It is estimated that they will have more than a trillion-dollar market by 2020.

One disruptive area that we have been quite lacklustre to adopt and exploit is the utilisation of blockchain framework to come up with innovative financial technology (fintech) solutions. Even through the blockchain framework can be utilised for multiple cross-cutting applications, its major utilisation has been in the creation of crypto currencies (or digital currencies).

There are literally hundreds of crypto currencies around these days, the most familiar being bitcoin. After the success of bitcoin, many followed suit and created other crypto currencies with new innovative features. Some examples include Ether, Litecoin, Ripple, Monero etc. The market capitalisation of crypto currencies has exceeded $160 billion of which bitcoin is still the leader with more than 45 percent of the total market share.

Crypto currencies make the process of making payments on the internet extremely convenient, fast and secure. Due to the sharp increase in the value of some of the crypto currencies, more notably bitcoin (currently one bitcoin is valued at approximately $4400), many people who invested in such crypto currencies have been raking substantial profits. Therefore, crypto currencies have now become analogous to stocks.

Even though the crypto currency market is extremely volatile, the interest in investing in crypto currencies has been growing significantly and scores of people have benefitted by investing in, and trading crypto currencies. One major apprehension regarding the adoption of crypto currencies has been due to the possibility of money laundering since there is no centralised entity that keeps track of the transactions taking place, rather a distributed community of miners who keep the blockchain updated on each transaction that takes place. However, despite such apprehensions, many developed countries like the United States, Japan, Germany, Singapore, Canada, Norway, the United Kingdom, Australia, New Zealand, and many more have not declared bitcoin as illegal. Even though in some countries there are restrictions on banks adopting the currency until suitable regulations are in place, there are no restrictions on individuals who intend to buy, sell, or trade crypto currencies.

Developed countries that have extremely strict regulations against money laundering, and still allow individuals to use crypto currencies, show that with the right regulatory framework in place, newer currencies that operate differently compared to traditional currencies, can be safely adopted, and in phases if at once immediately.

In Pakistan, the State Bank only allows foreign currency remittances in a few exceptional cases even if the amount to be transferred is very small. Foreign remittances for online trading and e-commerce are not allowed by the banks due to such regulations. That restricts many individuals who intend to benefit from the various opportunities present in the digital economy. Pakistan is a thriving country for freelancers and ranks among the top five countries in world in the freelancing sector. Many freelancers, however, share a common complain regarding the difficulty of getting paid due to the lack of proper e-commerce platforms.

Instead of blocking ways for our digitally talented youth to benefit from the tremendous opportunities available, and burying our heads in the sand, it is about time our policymakers mulled over the existing regulations related to e-commerce and online trading. A major analog component that facilitates a systematic digital transformation in any country is the regulatory framework in place.

If the regulatory framework is progressive and facilitates adoption of new technologies especially related to the fintech’s and e-commerce, while at the same time prohibits illegal exploitation and use, a lot of people can benefit and build up the foreign exchange significantly, thereby having a positive impact on the economy. At the same time, people will be able to trade using proper banking channels instead of using other means to do the same.


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