However,things are slowly changing. Since digital currencies can also be used forillegal purposes, Pakistan’s Financial Action Task Force (FATF) has recentlyrecommended the adoption of a new regulatory framework, meant to limit thepotential for crypto-based illegal activity, while also allowing localfinancial regulators to better oversee the market. As such, Pakistan was forcedto accept the use of digital currencies despite its prior negative stance.
Thiswill only happen with the adoption of the new regulatory framework, whichclassifies all crypto-related companies as Electronic Money Institutions(EMIs). In other words, this means that companies responsible for processingcrypto payments, or offering crypto-based services, will have to apply for aspecial license, and comply with all regulations. Failure to do so will lead toactivity suspension, or even a loss of license. Generally, these regulationsrefer to AML/KYC policies, and tracking of user funds to ensure that no illegalactivity is happening. Whileclose monitoring of the crypto market is somewhat against its principles,things are moving forward for the Pakistani crypto market. This is great newsgranted that a significant percentage of the country’s population remainsunbanked.
Is a CBDC on its way?
Apartfrom adopting new regulations, recent reports indicate that the PakistaniGovernment and Central Bank are considering launching a central bank-backeddigital currency (CBDC) by 2025. Assuch, Jameel Ahmad, the deputy governor of Pakistan’s State Bank (SBP),recently gave a press statement, where he mentioned that his institution was workingon a CBDC, for the purpose of “promotingfinancial inclusion and reducing inefficiency and corruption.” Anotherargument given for the CBDC launch was: “Itis our government’s policy to encourage the use of e-commerce amongst thepublic through awareness campaigns to promote a culture of e-commerce, whichsupports electronic business transactions at national, regional andinternational levels.”
Workon such a project certainly makes sense granted that the bank is planning tobecome fully digitized by 2030, and what better way to achieve this goal, thanreleasing an actual digital currency? Sofar, no additional information on the central bank digital currency has beengiven. With this in mind, we don’t know whether its value will be tied to thePakistani rupee, or if its focus will be on facilitating P2P and cross-borderpayments, or on handling monetary settlements between banks and otherinstitutions.
Based on everything that has been outlined so far, Pakistan has now become one of the newest countries to announce work on their own CBDC. It will certainly be interesting to see whether the popularity of the CBDC trend will exceed the cryptocurrency market, or if decentralized, transparent and semi-anonymous cryptocurrencies will prevail.
Featured Image via BigStock.
