Pakistan Prepares for Digital Transformation: SBP's Potential Introduction of CBDCs

Pakistan’s central bank, the State Bank of Pakistan (SBP), is considering the bold step of establishing central bank digital currencies (CBDCs) as legal tender, marking a substantial evolution in its approach to digital finance. Historically cautious, the SBP had categorized cryptocurrencies, such as Bitcoin, as illegal, emphasizing concerns over their volatility and lack of consumer protections.

Now, new amendments set for federal cabinet review suggest the SBP is prepared to embrace digital finance but with strict regulatory control. These adjustments would enable the SBP to develop and issue its own digital currency, offering a state-backed alternative to privately issued cryptocurrencies, which remain banned in Pakistan. This proposed CBDC would function alongside traditional physical money, creating a dual system aimed at supporting the nation’s growing digital economy.

To support this transition, the SBP intends to establish a subsidiary focused on digital payment infrastructure, reinforcing its dedication to a regulated, structured ecosystem for digital finance. Integral to these amendments are strict penalties for unauthorized digital currency issuance; offenders could face fines up to twice the value of the unlicensed currency. These penalties reflect Pakistan’s cautious yet proactive stance on digital finance, aiming to secure safe pathways for innovation while curbing unregulated financial activities.

The shift highlights the SBP’s evolving view on digital finance, differentiating between risky private cryptocurrencies and a regulated digital currency. This planned framework aims to reduce financial risks while promoting secure, monitored digital transactions across Pakistan. Further, the amendments propose broader authority for the SBP’s board, allowing it to approve a wider array of financial reports and to strengthen governance—ensuring the digital finance landscape is both innovative and secure.

Ultimately, Pakistan’s approach to CBDCs aligns with its goal of fostering a regulated digital economy, potentially transforming how digital transactions are conducted nationwide.