Will Cryptocurrencies Replace Fiat Money in Pakistan? Analysis of Risks and Rewards

Abstract

This paper analyzes whether cryptocurrencies can replace fiat money in Pakistan by assessing the risks and rewards. A mixed methods approach was utilized, including a survey of 123 cryptocurrency users in Pakistan and analysis of historical price data of Bitcoin, Ethereum, and the Pakistani Rupee (PKR). The key research questions addressed were: 1) What are the risks and rewards perceived by current crypto users in Pakistan? 2) How volatile are leading cryptocurrencies compared to PKR? and 3) What key factors promote or inhibit mainstream crypto adoption? Key findings show security risks are the top concern amongst users, while financial gains are seen as the top reward. Historical volatility of BTC and ETH was significantly higher than PKR. The main barriers to adoption were lack of regulatory clarity, price instability, and limited merchant acceptance; while decentralization, inflation resistance, and investment gains made cryptocurrencies attractive. The study concluded that under current conditions, cryptocurrencies are unlikely to fully replace PKR, but may see increased niche adoption. Wider adoption depends on managing risks and increasing everyday utility.

Keywords: cryptocurrency, Bitcoin, Ethereum, fiat money, risks, rewards, Pakistan