The State Bank of Pakistan brought in new laws for non-bank businesses offering digital payment solutions in order to welcome a CBDC within the next three years.
CBDCs, or central bank digital currencies are gaining popularity amongst regulated banks across the globe – where the technology that powers crypto is used as a method to make fiat finance better.
Pakistan is amongst the latest to join the CBDC train, having announced new regulations that will make the launch for a CBDC possible by 2025.
According to local media outlet Arab News, the State Bank of Pakistan (SBP) signed and designed new laws to regulate non-bank businesses and entities who offer digital payment instruments, dubbed Electronic Money Institutions (EMIs), with guidance from the World Bank.
This means that non-banks, particularly independent crypto businesses, have to register and obtain a licence with the SBP as an EMI in order to issue digital assets, including but not limited to tokens, stablecoins, and CBDCs, in order to operate legally.
Amongst the regulations for EMIs include consumer protection laws, regulatory reporting requirements, and preventative measures against financial crimes and misconduct, including money laundering and terror financing.
Jameel Ahmad, Deputy Governor of the SBP expressed that the decision to implement EMIs will promote Pakistan’s digital footprint, and to curb not only inefficiencies within the fiat system, but also tackle fiat-based corruption. “These landmark regulations are a testament of the SBP’s commitment toward openness, adoption of technology and digitization of our financial system,” said Ahamad.
Similarly, Finance Minister Asad Umar highlights that EMIs will protect financial institutions from cyber attacks.
Pakistan’s State Bank had first announced that they were working on a CBDC in April 2019. In the announcement, the SBP stated that they hope to promote economic inclusion, efficiency, and combat corruption within the state’s financial systems.
In November 2019, the SBP, through the World Bank’s Financial Inclusion Support Framework (FISF) launched the National Payment Systems Strategy, with the objective to design a National Payment System (NPS) that complies with international standards, and to meet the country’s needs.
Within the South Asian region, neighbouring country India is reportedly making final preparations in piloting the digital rupee. On November 22, the Reserve Bank of India (RBI) announced that it will have started a retail CBDC pilot by the end of 2022.
The digital rupee pilot will be tested amongst 10,000 to 50,000 users of participating banks within the program.
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