IMF Rejects Pakistan's Bitcoin Mining Power Subsidy Plan

The International Monetary Fund (IMF) has rejected Pakistan’s proposal to offer discounted electricity rates to Bitcoin mining ventures and other energy-intensive industries. This decision has raised concerns over potential market distortions, grid strain, and fiscal risks. The government has not yet finalized the plan and is still seeking advice from international organizations.

The development was confirmed during the Senate Standing Committee on Power meeting, where Secretary of Power Dr. Fakhray Alam Irfan stated that the IMF has not approved the proposal. The IMF raised a red flag about the plan, expressing worries about market disruptions related to Pakistan’s plan for subsidized energy rates. This concern follows the IMF's previous questioning of Pakistan’s push for power in Bitcoin mining, warning of legal and power utilization issues.

The global financial authority also listed several other concerns, such as the legality of mining crypto in Pakistan and further pressure on the overloaded power system. In addition, the fund cautioned about resource allocation and its impact on electricity prices. In May, Pakistan declared that it would dedicate 2,000MW of power to support crypto mining and data centers as a strategy to entice foreign investment. The Pakistan Crypto Council leads the initiative, with backing from the Finance Ministry. The IMF said Pakistan did not engage with the fund before announcing the plan.

Despite the IMF turning down the proposal earlier, the government is still negotiating with the regulatory body to revise its power subsidiary plan. The committee also discussed technological measures that can help stop electricity theft. Notably, the government recently made a deal with scheduled banks to lower the amount of circular debt. This topic was also included in the committee’s discussion. The committee has ordered the Power Division to provide detailed replies to address several issues at the next meeting.

Earlier, Bilal Bin Saqib, the CEO of the Pakistan Crypto Council (PCC), announced that Pakistan intended to use some of its extra electricity for Bitcoin mining and AI data centers. He then added that they discussed the situation with various mining companies. Pakistan’s power sector faces challenges, including higher electricity prices and an excess power-generating capacity. Solar power’s rapid growth has become even more confusing, as many consumers are looking at alternative energy sources to offset high utility costs.

Saqib highlighted that the location of the mining center will be decided by the availability of surplus power in different areas. Interestingly, Changpeng Zhao, the founder of Binance, was involved in this initiative. Reports revealed that Zhao acts as a strategic advisor to the Pakistan Crypto Council. His role in the Pakistan council included supporting blockchain infrastructure, providing regulatory framework advice, helping with national projects like digital currency and mining, and teaching young people about blockchain technologies.

Saqib noted that the country has between 15 and 20 million crypto users, is the world’s third-largest freelancing economy, and has an expanding fintech sector. In a statement, he expressed that Pakistan ranks among the top 10 countries globally for crypto adoption, even though it has not been officially regulated. Meanwhile, concerning Pakistan’s finance ministry’s announcement that the country will provide 2,000 megawatts of electricity to support Bitcoin mining and AI data centers, this plan was part of Islamabad’s strategy to utilize its excess electricity for Bitcoin mining and AI data facilities.

In addition to attracting foreign investment, the ministry said the initiative was meant to turn excess electricity into a source of income and provide advanced job opportunities. This allocation marked the beginning of the first step of a bigger plan to develop digital infrastructure in several stages. The IMF's rejection of Pakistan's proposal highlights the complexities and challenges associated with integrating cryptocurrency mining into national energy policies, particularly in regions with strained power systems and fiscal constraints. The ongoing negotiations between Pakistan and the IMF underscore the need for a balanced approach that considers both economic benefits and potential risks.