Pakistan is taking a major step toward integrating cryptocurrency into its financial system. On November 4, 2024, the State Bank of Pakistan (SBP) announced a set of policy proposals that could potentially legalize digital assets such as cryptocurrencies and central bank digital currencies (CBDCs) as legal tender across the country. These proposed amendments could bring significant changes to Pakistan’s financial landscape, including the creation of a government-issued digital rupee.
SBP’s Policy Proposals: A Potential Game Changer
The Monetary Policy Committee (MPC) of the SBP, chaired by Governor Jameel Ahmad, has submitted a package of amendments to Pakistan’s existing financial policies. If these amendments pass, state banks could be empowered to issue digital currencies and facilitate blockchain-based transactions, including buying, selling, and trading of cryptocurrencies. The proposals also introduce penalties for entities operating without state approval, providing a framework for both regulated cryptocurrency exchanges and digital payment services.
One of the most noteworthy aspects of the proposal is the potential introduction of a central bank digital currency (CBDC), likely in the form of a digital rupee, issued by the government. This move would align with a growing global trend of central banks developing their own CBDCs, which are seen as a way to modernize national financial systems and compete with cryptocurrencies.
The proposals still require approval from the Pakistani government to move forward, but their approval would mark a major shift in the country’s stance toward cryptocurrency and digital assets, which have previously been met with skepticism.
A Shift in Policy: From Banning to Legalization
Historically, Pakistan has been reluctant to embrace cryptocurrencies. In May 2023, the then Minister of State for Finance and Revenue, Aisha Ghaus Pasha, suggested that the country might move toward banning cryptocurrencies. However, in March 2024, following Pasha’s replacement by Muhammad Aurangzeb, the former CEO of Habib Bank Limited, the SBP’s stance on cryptocurrencies began to shift.
Aurangzeb’s appointment marked a pivot towards crypto adoption, and the policy proposals submitted in November reflect his leadership’s more favorable outlook on digital assets. This signals a potential regulatory framework that would support cryptocurrency businesses and blockchain technologies while protecting the economy from illicit activities associated with unregulated digital currencies.
Broader Economic Measures: Interest Rate Cut and Economic Optimism
In addition to cryptocurrency regulation, the MPC announced a 2.5% cut in interest rates, citing several positive economic indicators. These include a sharp decline in food inflation, favorable global oil prices, and the absence of expected gas tariff increases. The MPC’s outlook for Pakistan’s economy in FY25 has been optimistic, forecasting real GDP growth between 2.5% and 3.5%—an improvement from previous assessments.
This economic optimism could provide a favorable backdrop for the development of Pakistan’s digital assets market, assuming the SBP’s regulatory amendments are approved. The economic improvements, combined with the move to regulate cryptocurrencies, could provide a bullish signal for digital asset investors, particularly in a region where crypto adoption has been rapidly increasing.
Impact on Illicit Trading and the Digital Assets Market
If the proposed amendments are enacted, they could bring an end to illicit cryptocurrency trading in Pakistan. By creating a regulated environment for crypto exchanges and issuers, the SBP hopes to curb illegal activities and bring greater transparency to the market. The penalties for unauthorized digital asset exchange facilitators would further encourage compliance and potentially attract institutional investment.
This regulatory framework would also create a safer environment for consumers and businesses to engage in crypto-related activities with the assurance that they are protected under the law. As the cryptocurrency market continues to grow in Pakistan, a clear regulatory structure will be essential to ensure the country benefits from the innovations brought about by digital currencies and blockchain technology.
The Road Ahead: Challenges and Opportunities
While the policy proposals mark a promising development for cryptocurrency and blockchain adoption in Pakistan, there are still several challenges that need to be addressed before they become a reality. The government must balance innovation with consumer protection, ensuring that digital currencies do not become a tool for financial crimes such as money laundering or terrorist financing.
If successful, Pakistan could become one of the first countries to adopt cryptocurrencies and CBDCs as legal tender, positioning itself as a leader in the growing global digital economy. As Pakistan moves toward creating a regulated environment for cryptocurrencies, it will be essential for policymakers to continue working closely with financial institutions, crypto businesses, and global regulators to build a secure and sustainable digital financial ecosystem.
In conclusion, the SBP’s proposed amendments represent a bold step forward for cryptocurrency adoption in Pakistan, with the potential to transform the country’s financial system and encourage wider participation in the global digital economy. If the proposals pass, Pakistan could be on the cusp of a cryptocurrency revolution, with CBDCs and digital assets playing a central role in the nation’s financial future.
