Pakistan Follows India’s Path; To Recognize CBDCs

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As a seasoned researcher with extensive experience in the field of digital currencies and central banking regulations, I find Pakistan’s proposed amendments to their central bank act intriguing. Having closely observed the regulatory landscape of various countries, it is evident that Pakistan is following a path similar to its neighbor India, which has shown both interest and skepticism towards cryptocurrencies.

Pakistan’s government is planning to make changes to their Central Bank Act, aiming to acknowledge digital currencies and grant authority to its central bank to manage Central Bank Digital Currencies (CBDCs). This action aims to establish control over the crypto economy within Pakistan. Notably, Pakistan’s strategy mirrors that of its neighbor India, which has been proactive in promoting CBDCs but remains cautious about cryptocurrencies.

According to Pakistani media sources, the central government plans to make changes to the State Bank of Pakistan (SBP) Act. These amendments could potentially grant official recognition to digital currencies. If approved, this would mark the first instance where digital currencies are recognized as legal tender across the nation.

Furthermore, this transformation empowers the central bank to govern all these digital assets entirely. They will have the authority to create, circulate, and supervise these assets in both digital and physical formats. The draft suggests that digital currency is a digital version of money, issued by the bank under section 24, which is recognized as legal tender under section 25.

In simple terms, Section 24 grants the central bank (SBP) the power to produce currency notes, and these notes are considered valid money according to Section 25.

Earlier, the State Bank of Pakistan issued a notice to digital currencies like Bitcoin, Litecoin, among others, stating that they are not recognized as legal tender in Pakistan. The bank expressed concerns about these digital tokens since they might be utilized for illicit activities, and further noted that no legal safeguards apply in such instances. In an effort to evade being placed on the “grey list” by the Financial Action Task Force (FATF), Pakistan is currently working towards not validating cryptocurrencies, as one of the FATF’s requirements.

As a researcher, I’m excited to share an update on a new amendment. This amendment establishes penalties for the unauthorized issuance of digital currencies. The penalty is set at twice the value of the illegally issued currency. Additionally, this amendment removes restrictions on dual nationals holding high-level positions at the SBP, effectively overturning a rule that was proposed by the International Monetary Fund (IMF) in 2022.

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2024-11-05 12:04