Central bank digital currencies (CBDCs) for regulators around the globe is a method to improve the capabilities of fiat currency by combining the financial ability of technology that supports cryptocurrencies. By announcing new rules to ensure the establishment of an internal CBDC by 2025, Pakistan added its name to this list.
In order to secure the timely issue of a CBDC throughout the following three years, the State Bank of Pakistan (SBP) approved new rules for Electronic Money Institutions or EMIs (non-bank entities that provide digital payment instruments). According to local media outlet Arab News, the World Bank assisted Pakistan in creating the new legislation.
The regulations mandate preventive measures against money laundering and terror funding while taking consumer protection and reporting obligations into consideration, in addition to timeline adherence for the CBDC debut.
EMIs will get their CBDC licenses issued by the SBP. Asad Umar, the finance minister, said at the announcement that using EMIs to promote a digital economy will protect financial institutions from cybersecurity risks. Using CBDCs, SBP Deputy Governor Jameel Ahmad wants to reduce corruption and inefficiencies brought on by fiat currency.
These historic rules, according to Jameel, demonstrate the SBP’s dedication to transparency, technology adoption, and the digitization of our financial system.
“These landmark regulations are a testament of the SBP’s commitment toward openness, adoption of technology and digitization of our financial system.”
The country has joined roughly 100 other nations that are actively interested in exploring and establishing CBDC activities thanks to the start of a quick regulatory framework.
Pakistan’s geopolitical rival and neighbour, India also joined the unofficial global competition to establish a domestic CBDC. The Reserve Bank of India (RBI) unveiled an ambitious proposal on November 22 to start a retail CBDC pilot program by the end of 2022.
According to reports, the retail digital rupee pilot launch, which would initially be tested among 10,000 to 50,000 consumers of participating banks, is currently in its last stages of preparation by the Reserve bank of India (RBI).
Financial institutions all over the world are counting on the CBDC to streamline international trade. Other nations, such as Zimbabwe, Russia, Australia, etc., have been working on their CBDCs. Thailand proposed in October that the pilot project’s trial phase, which entails using the CBDC to make payments for goods and services that resemble cash, begin at the end of this year.
As Todayq News reported earlier this month, the Bank of Korea has created and tested a method that streamlines international transfers. By connecting different central bank digital currencies (CBDC) globally, the bank hopes to streamline the process.