Unregulated trading apps eclipse legal markets

Experts warn of organised cyber scams, dollar flight through illegal platforms

KARACHI:

Pakistan’s financial regulators face a growing challenge from the rapid spread of unregulated online investment and trading apps. These apps promise easy profits but often result in financial losses, data theft, and negative impacts on the economy.

The proliferation of such platforms, many operating beyond the oversight of the Securities and Exchange Commission of Pakistan (SECP) and the State Bank of Pakistan (SBP), has raised serious concerns about investor protection and the integrity of the country’s financial system.

“With the increasing penetration of broadband internet service and its users, cybercrimes are on the rise in Pakistan and worldwide, causing monetary losses to consumers and building mistrust about legal digital services,” said Ibrahim Amin, a banking and financial expert.

The case of Ducky Bhai, a popular social media influencer, illustrates the issue vividly. Initially known for his humorous roasting videos, he transitioned to gaming and then family vlogging before venturing into app promotions, including investment and trading apps that turned out to be illegal.

When authorities discovered his involvement in promoting these platforms, he was apprehended. Officials stated that these apps, while appearing to offer investment opportunities, were often thinly disguised betting or gambling services.

According to the SECP, such promotions violate investment laws, particularly those prohibiting advertisers from guaranteeing or implying assured returns. Many influencers, however, continue to promote these apps under the guise of “financial opportunities,” often motivated by affiliate commissions or kickbacks.

This trend reflects a dangerous combination of financial illiteracy and misleading marketing, exposing millions of users to scams and unregulated investment channels. 

Crackdown on illegal apps 

In a major development, the National Cyber Crime Investigation Agency (NCCIA) recently declared 46 mobile applications and websites, including betting, forex, and online trading platforms, illegal in Pakistan.

The list included popular global names like 1xBet, Aviator, Dafabet, and Bet365. The Pakistan Telecommunication Authority (PTA) subsequently blocked these applications to safeguard users from fraud, data theft, and identity misuse.

Unregulated investment apps continue to attract millions of Pakistani users. The allure lies in their convenience, easy-to-use interfaces, and promises of high returns with minimal effort. “These apps are designed to look simple and exciting – you just download and start earning. But what users don’t realise is that there’s no legal protection if things go wrong,” said fintech analyst Mutaher Khan, Co-Founder of Data Darbar.

The numbers are staggering. Olymp Trade, for instance, has amassed over 5.6 million downloads in Pakistan. Even if only 5% of these are active users, that still exceeds half the number of investors in the Pakistan Stock Exchange (PSX).

Similarly, IQ Option has been downloaded 3.9 million times in Pakistan, placing the country sixth globally, behind India and Brazil. Binance, the cryptocurrency platform, has recorded 14.2 million downloads from Pakistan since 2017, making the country its second-largest market by downloads after India.

In the finance apps category, the most downloaded app is EasyPaisa with 12.1 million downloads, followed by JazzCash with 10.4 million, and Binance with 5.4 million – despite not being regulated in Pakistan.

In e-commerce, Temu is the most downloaded app with 8 million downloads in its debut year, followed by Daraz with 7.7 million. The irony, experts note, is that Daraz is a regulated platform, while Temu is not registered or regulated in Pakistan, which indicates the state of regulation in the country.

Such popularity reflects both the public’s interest in quick financial gains and the lack of accessible, appealing, and well-marketed regulated investment options. “The cybercrimes could be controlled through raising awareness among users and taking strict action against criminals within and beyond borders,” said Amin.

Deputy Chief of the Citizens-Police Liaison Committee (CPLC) Sindh, Shabbar Malik, said scams have been reported nationwide and, in certain regions, have developed into “organised, patronised systems” that coordinate such activities.

Malik emphasised that tackling the issue requires joint responsibility between the government and the public. “Half the responsibility lies with the authorities, and the other half with citizens. People must be made aware and learn to be smart when using digital devices,” he said.

Experts warn that unregulated investment platforms pose not just individual risks but also macroeconomic threats. Since many of these apps facilitate trading in foreign assets or  cryptocurrencies, they contribute to dollar outflows, a serious concern for a country with fragile foreign exchange reserves of less than $20 billion.

“When Pakistanis invest in offshore assets through these apps, it drains dollars out of the system. With reserves hovering around $20 billion, even modest outflows can exacerbate pressure on the rupee and the balance of payments,” explained an economist at a Karachi-based think tank.