Pakistan moves to legalize cryptocurrency as the government proposes amendments to the SBP Act, signaling a significant shift in its financial policy.

Proposed Amendments to the SBP Act

According to a recent report, the amendments would allow the State Bank of Pakistan (SBP) to issue digital currency and manage the country’s money in both physical and digital forms. These changes include granting the SBP the power to conduct “central bank digital currency” (CBDC) business, enabling CBDCs to operate as legal tender. Additionally, the SBP plans to establish a subsidiary dedicated to developing and operating digital payment systems.

Historical Context and Legal Considerations

Historically, Pakistan’s central bank has classified cryptocurrencies like Bitcoin (BTC) as illegal tender, issuing warnings about the associated risks. The central bank has specifically highlighted the lack of legal protections for financial losses resulting from the high volatility of cryptocurrencies.

The proposed amendments introduce penalties for the unauthorized issuance of digital currencies, imposing fines equal to twice the value of any illegal currency created. This move aims to deter illegal activities and ensure regulatory compliance.

Implications for the Financial Framework

While no specific timeline has been announced for federal cabinet approval of the amendments, these changes could significantly influence regulatory oversight and the integration of digital currencies into Pakistan’s financial framework. The amendments would also expand the SBP board’s authority, enabling it to approve a wider range of financial reports and enhance governance processes.

The proposed amendments could shift the narrative toward regulatory oversight and the integration of digital currencies into Pakistan’s financial framework.

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