In a major policy shift, Pakistan’s government has introduced amendments to the State Bank of Pakistan (SBP) Act. This move will potentially paving the way for the legalization of digital currencies and updating the governance framework of the country’s central bank. The proposed changes, now submitted to the federal cabinet, would allow the SBP to oversee digital and physical assets alike, marking a notable regulatory shift.
Pakistan to Embrace Crypto?
If passed, Pakistan would join an increasing number of countries seeking to integrate crypto within a regulated system. According to the proposed legislation, the SBP would gain the authority to regulate digital currency issuance and management. The amendments would define “digital currency” for the first time in the SBP Act, giving the central bank oversight over digital currency as a recognized financial asset.
To facilitate this shift, the SBP plans to create a subsidiary dedicated to the development and management of digital payment systems. This would enable efficient integration of digital currency into the country’s financial infrastructure.
Additionally, the proposed changes involve repealing a restriction that bars dual nationals from assuming high-level positions in the central bank, including the roles of governor and deputy governor. Section 13 of the SBP Act currently disqualifies dual nationals from holding such posts, a provision introduced in 2022 under influence from the International Monetary Fund (IMF), though not mandated by it.
INTEL: Pakistan is set to legalize crypto through new amendments to the SBP Act
— Solid Intel 📡 (@solidintel_x) November 4, 2024
“We may need to bring a few things back to Parliament, particularly regarding nationality,” remarked Finance Minister Muhammad Aurangzeb. He also hinted at the push for a larger, more diverse talent pool to fill central bank leadership roles.
Advertisement
If this amendment is approved, experienced dual nationals, such as Deputy Governor Dr. Inayat Husain, would be eligible for reappointments. This change is viewed as a means to expand the talent pool within Pakistan’s central banking system, ensuring top-tier professionals can serve in key roles.
Other Changes Expected in SBP Amendment
The amendments also seek to boost compliance and governance within the SBP. New penalties will be enforced for the unauthorized issuance of digital currencies, with fines set at twice the value of the assets issued without regulatory approval. Moreover, the SBP will report suspicious financial transactions to the Financial Intelligence Unit-Netherlands (FIU-NL), reflecting a broader emphasis on regulatory oversight and financial integrity.
Governance updates in section 9A of the Act would expand the SBP board’s authority over financial reporting, permitting the board to approve more comprehensive reports, including half-yearly and annual statements. Section 9B amendments would streamline board meetings, allowing either the board chairperson or a minimum of three non-executive directors to convene meetings, thereby enhancing decision-making efficiency within the central bank.
This legislative move follows a directive by the Sindh High Court mandating the government to establish a regulatory framework for crypto assets within three months. The court order came in response to a 2018 SBP statement advising against crypto transactions, which was challenged by a recent petition. The court’s ruling called for a comprehensive review involving various government bodies, including the SBP, the Ministry of Finance, and the Pakistan Telecommunication Authority.
Meanwhile, the SBP has been accelerating efforts to introduce a digital rupee by 2025. Governor Jameel Ahmad emphasized the need for a digital currency to counter the growing use of alternative currencies, noting that high inflation is pushing individuals toward cryptocurrencies. This move could also influence other Asian countries to embrace digital currencies, however, nothing is certain at the moment.
Advertisement
Also Read: Bitcoin Price Shift: U.S. Elections link to BTC
