Pakistan has joined the growing number of countries looking to launch their iteration of a central bank digital currency (CBDC) by passing new laws to assist in the process.
State Bank of Pakistan (SBP), the country’s central bank, announced the formulation of new regulations for Electronic Money Institutions (EMI) to aid its efforts in launching a CBDC. These EMIs are non-bank entities with the power to issue digital currency for digital payments in support of the central bank.
“This new category of institutions will complement the efforts of the government in creating an enabling environment to empower stakeholders in trade and commerce. This will help businesses in improving their productivity and contribute toward positioning the nation for global competition,” said Finance Minister Asad Umar.
Umar noted that the purpose of the new regulations guiding the EMIs is to ensure that Pakistan launches its CBDC by 2025. The rules, which experts have described as “landmark in Fintech space,” were designed with the World Bank’s help, according to information gathered by Arab News.
Aside from the provision of a three-year window for the launch of the CBDC, the rules make provision for the misuse of digital assets in money laundering, drug trafficking, and terrorism financing. Other areas broached by the new rules include proper Know Your Customer (KYC) requirements and consumer protection guidelines.
The SBP will issue the operational licenses to EMIs for CBDC issuance, which Deputy Governor Jameel Ahmad of the central bank says will reduce fiat corruption and inefficiency.
“These landmark regulations are a testament to the SBP’s commitment toward openness, adoption of technology, and digitization of our financial system,” said Ahmad.
A head start for Pakistan
Pakistan’s decision to introduce new laws for EMIs has pushed the country into the exclusive list of countries that are considering launching their own CBDCs. The plan is fuelled by similar moves from its neighbor India, which recently launched a retail CBDC pilot.
Pakistani authorities are looking to close the gap between Pakistan and other Asian countries like Singapore, Indonesia, Thailand, and Hong Kong that have gained a headstart in the CBDC race.
It is unclear whether Pakistan will choose to rely on distributed ledger technology (DLT) in the development of a CBDC or follow India’s path in using a centrally-controlled infrastructure. The Reserve Bank of India (RBI) cited the security flaws associated with DLT for not using it for its CBDC pilot “given the probable low volume of data throughput.”
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