Talking Bitcoin, AI, and Pakistan's next economic leap with Faisal Aftab

A futuristic world whose glimpses can already be seen. AI models with processing capabilities outpacing humans' by hundreds, if not thousands of times. Digital currencies instead of cash. Foreign reserves made of stablecoins. The only question - Is Pakistan ready for it?

Nukta's Faizan Kamran Khan sat down with Zayn Venture Capital's Founder and CEO Faisal Aftab for an enlightening discussion on how AI, crypto, and blockchain technology are transforming the world and how Pakistan is doing in this race towards the AI frontier.

At the outset of the conversation, Aftab pointed out that ChatGPT's IQ stood at 155 in January last year, which was around that of Einstein. However, since its processing power doubles every 18 months, its IQ was expected to surpass the famed scientist's.

"Scientists are discovering that some models' processing capabilities are doubling in six months. What happens when [their IQ] crosses 1,000 or even 10,000?"

He then went on to describe the impact this would have on jobs, especially white-collar ones, hitting an anxiety that many people have regarding AI's impact.

Aftab said many jobs such as OPD doctors, lawyers, software engineers, and architects, would become obsolete as AI automation becomes commonplace.

This was because the "playbook" currently in use was the same one that the current generation of working professionals' parents and grandparents had used. It is time to re-tool, according to Aftab.

'World War 3'

The ZaynVC Founder believed that the world was currently witnessing World War 3. But instead of traditional battles, the war was about which country's money or stablecoin would be used as a reserve currency or reserve asset.

He explained that for everything that exists in the real world, an equivalent is created in the digital world. For instance, Bitcoin is the digital equivalent of gold. Stablecoins are the equivalent of reserve currencies such as the U.S. dollar, Euro, British Pound, and the Yen.

When the Russia-Ukraine war started, the West moved to impose sanctions on Russia, including through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system that allows banks and financial institutions to securely communicate on a range of matters, including payments and transfers.

Thus, when countries such as China saw this, they realized they needed to have an alternate, with the alternate being assets such as stablecoins that would not use the centralized finance systems, according to Aftab.

Should Pakistan legalize crypto?

When asked whether Pakistan should legalize crypto, Aftab said he was not in favor of it.

Elaborating on his opinion, he pointed out that unlike physical cash or assets such as gold, crypto could easily be moved across borders. Once, it was legalized, people would rush to invest in them because, in his words, "which person would not want to go towards something that gives them 500-600x returns every five years?"

However, it would also lead to a rush in capital transfer. "If you allow people to withdraw bitcoin, then your economy will collapse and your real economy needs that injection. It doesn't make any sense" he added.

The ZaynVC CEO said it was a "foregone conclusion" that Pakistan would need to have a central bank digital currency (CBDC).

Eleven countries around the world already have CBDCs while pilots are being run in China, India, and Russia among others. Pakistan's central bank officials have also stated that it is working on a CBDC.

However, he said Pakistan's CDBC could not only be pegged to the PKR but should be pegged to a basket of commodities.

Bitcoin as a strategic reserve

Aftab observed that to "get a seat" among countries whose stance holds power, any country needed two things - gold and nuclear assets.

"In order to beat the market and if you have dignity as a country, as we used to when we stood alongside India, you have to think outside the box," he stated, which included creating a Bitcoin reserve that would serve Pakistan well as the world moves towards a cashless economy.

'New emerging digital economy'

Aftab said he saw Pakistan as a "new emerging digital economy". Its problems were structurally similar to those of India in the 1970s, and 2013 when it came to problems regarding the digital economy. "India got a legacy at Partition but we had to invent," he noted.

However, the problems were not difficult to solve. Pakistan needed to synergize its policies related to structural reforms and digitalization, he advised.

"We’re like a 16-17 year old child as a nation but that doesn’t mean we should give up."

He identified two main problems that had caused Pakistan to lag - a lack of continuity in governance and policies. "We need to have the same policies for a 10-15 year period."