In line with global trends, Pakistan has begun research to pave the way for the introduction of its own digital currency, similar to the well-known bitcoin cryptocurrency, in order to expand banking services to the financially disadvantaged and make the fight against money laundering and terror financing easier.
Furthermore, the virtual money would aid the leadership in the fight against corruption, which is a priority for the current Pakistan Tehreek-e-Insaf (PTI) government. The Pakistan People’s Party (PTI) was elected in August 2018 on the promise of ending corruption in the country.
In a recent interview, State Bank of Pakistan (SBP) Governor Reza Baqir remarked, “We are investigating it (the central bank’s creation of a digital currency) very thoroughly.”
“The benefit is twofold: not only will it give a boost to our efforts for financial inclusion, but it will also allow us to make additional progress in our battle against money laundering and terrorism funding because it is a central bank-issued digital currency,” he said.
“In the next months, we hope to be able to make an announcement on that (digital currency).” For the time being, we have established a framework for digital banks to operate in Pakistan.”
Electronic currency will not be able to completely replace traditional cash notes and coins in the near future. For years and decades, hard cash will continue to reign supreme, and the two currencies may coexist in the system.
However, it has been learned that the Ministry of Finance may at least adopt the digital money and gradually boost its use in order to combat corruption.
The most significant advantage of digital currency is that every financial transaction is recorded, allowing authorities to keep track of who gives money to whom and for what purpose.
The digital currency can also be used by government offices to make payments between ministries, from the federal government to provincial governments, and from provincial governments to municipal and district governments and other government departments.
Similarly, the adoption of virtual currency – which, unlike physical currency and coins, is stored in computers and mobile phone wallets – will aid the government in its fight against money laundering and terror financing, in accordance with the Financial Action Task Force (FATF) – the Paris-based global financial transactions watchdog – action plan.
Over the last two years, Pakistan has improved its compliance with 27 items of the FATF action plan. In the next months, Islamabad is expected to be included to the FATF’s white list.
By breaking into new global markets, Pakistan’s categorization onto the white list will allow it to attract new foreign investment and increase export profits.
Furthermore, the use of electronic currency will allow authorities to provide banking services to the financially disadvantaged, as well as document all financial transactions and economic activities in general.
At the moment, money moved from one person to another via mobile and internet banking, as well as various applications, is not considered digital currency. In actuality, it is physical currency, as real cash is used to execute financial transactions at some point.
