This Islamic Country Proposes Ambitious Plans For a Crypto Initiative

In a big step towards digital and crypto finance the State Bank of Pakistan (SBP) has proposed amendments in State Bank of Pakistan Act to recognize digital assets including cryptocurrencies as official currency. This is a big change from Pakistan’s previous stance on digital currencies from being cautious to potentially legalizing and regulating.

A Paradigm Shift: From Caution to Acceptance

Pakistan has been cautious on cryptocurrencies. In January 2022 the SBP and the government decided to ban all cryptocurrencies in the country citing illegal activities and financial instability. But with global adoption of digital currencies growing and the benefits they offer the stance is being reevaluated.

Digital currencies will be given legal tender status to be used for payment of goods, services and debts. This is in line with global trend where countries are exploring or have already implemented frameworks to include digital currencies in their financial system.

Empowering the SBP: Issuance and Regulation of Crypto Currency

One of the key components of the proposal is to give the SBP the authority to issue and regulate digital currencies. This could lead to a Central Bank Digital Currency (CBDC) for Pakistan, a state backed digital currency alternative to existing cryptocurrencies. SBP has been working on the concept of CBDCs and plans to launch a pilot in two months once the ground work is completed.

By having digital currency management under its umbrella, SBP will be in charge of both physical and digital currency, a single and secure financial system. This will lead to financial inclusion, reduce transaction costs and improve monetary policy implementation.

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Regulatory Measures: Penalizing Unauthorized Issuance

To protect the system the framework has strict rules against the unauthorized issuance of digital currencies. The culprits will be fined twice the value of the illegally issued digital assets. This shows the governments commitment to stop illegal activities and to have digital currency under a regulated and transparent environment.

Also, the SBP will establish a subsidiary to develop and operate digital payment systems further to strengthen its role in the digital currency landscape. This subsidiary will create secure and efficient platforms for digital transactions and build trust and reliability among users.

Inclusive Leadership: Allowing Dual Nationals in Key Positions

The amendments also want to reverse previous restrictions by allowing dual nationals, including governors and deputy governors, to hold top positions in SBP. This will broaden the talent pool so the central bank can benefit from diverse expertise and views.

Finance Minister Muhammad Aurangzeb said we may have to bring a few things back to the parliament, especially regarding nationality. This inclusive approach will help SBP to navigate the complexities of the changing financial landscape.

Conclusion

SBP’s proposal to amend its charter to recognize and regulate digital currencies is a big moment in Pakistan’s financial history. By embracing digital assets and exploring a CBDC, Pakistan is ahead of the region in the curve. The proposed regulations and inclusive policies show a holistic approach to integrating digital finance into the economy safely and efficiently.

As the world moves towards digital finance, Pakistan’s proactive approach can be a model for other developing countries to benefit from digital currencies while ensuring financial stability. The success will depend on thorough planning, robust regulations and continuous adaptation to technology.

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