The State Bank of Pakistan (SBP) recently announced a policy proposal package on November 4, aimed at legalizing digital assets such as cryptocurrencies, allowing them to become legal tender nationwide.
In a meeting chaired by SBP Governor Jameel Ahmad, the Monetary Policy Committee (MPC) presented amendments to the existing policy, allowing state banks to issue digital currency. These amendments also propose penalties for entities issuing digital currency without approval from the regulatory authority.
Although these proposals still require government approval in the next phase, if passed, they could pave the way for the emergence of a central bank digital currency (CBDC), with the digital rupee being a specific application of this initiative.
Developments in cryptocurrency policy in Pakistan
The report also indicates that state banks will be allowed to provide digital payment services, facilitating transactions based on blockchain technology, including buying, selling, and trading cryptocurrencies.
Previously, the MPC had shown caution and reluctance in accepting cryptocurrencies. In May 2023, the then Minister of Finance and Revenue, Aisha Ghaus Pasha, led public opinion to believe that Pakistan was preparing to impose a ban on cryptocurrencies. However, after Ms. Pasha was replaced by Muhammad Aurangzeb, the former CEO of Habib Bank Limited, in March 2024, he quickly signaled a reversal of the MPC's anti-cryptocurrency stance.
Interest rate cut and positive economic outlook
On the same day, the MPC also announced a decision to cut interest rates by 2.5%, accompanied by significant economic improvements. This move is explained by 'a sharp decline in food inflation, favorable global oil prices, and no expected adjustments in gas taxes or the PDL exchange rate.' The MPC also gave an optimistic forecast for the next fiscal year, with expected real GDP growth for 2025 ranging from 2.5% to 3.5%.
This could become a positive signal for the cryptocurrency and digital asset market in Pakistan, if SBP's amendments are approved. Furthermore, legalizing cryptocurrencies would help mitigate illegal transactions and establish a framework for handling unauthorized digital asset transactions.
If SBP's proposals are approved, Pakistan will enter a new era for cryptocurrencies, not only legalizing the use of digital assets but also facilitating transparent and secure electronic payment transactions. This action could not only increase the attraction of the domestic cryptocurrency market but also positively impact the national economy in the future.
