KARACHI: State Bank of Pakistan (SBP) Governor Reza Baqir has reiterated his stance on cryptocurrency, saying it doesn’t have a use case that can further the goals like financial inclusion or innovation — key objectives of the banking regulator.

During a panel discussion at the 13th Karachi Litera­ture Festival on Sunday, Mr Baqir agreed that the underlying technology behind the crypto — i.e. distributed ledger — “is an absolutely useful technology” and it has the potential to solve a lot of problems that the world faces right now in providing access to finance.

However, “when we look at the value proposition offered by crypto right now, the use cases that have been brought forward have just been exchanges”, Mr Baqir said, explaining that people wanted the regulator to allow Bitcoin use, speculate on it and then also transfer money abroad.

“Every new thing has some benefits and some risks. It’s a policymaker’s job to make an assessment of the balance… in particular, make a judgement whether the benefits outweigh the risks with regards to the use of cryptocurrencies in Pakistan,” he said.

The SBP governor also questioned the lack of visibility in cryptocurrencies. “There is no way that the regulator or a law enforcement agency has visibility on who is doing transactions and for what purpose. And, therefore, around the world there is a lot of misuses [of cryptocurrency], including human rights violations, trafficking of people, money laundering and many other things,” he said.

SBP’s key goal was to promote financial inclusion and stop the misuse of the financial system, “especially because Pakistan is a country that is on the grey list of the FATF”, Mr Baqir said, referring to global money laundering and terrorist financing watchdog the Financial Action Task Force (FATF), which has placed Pakistan on its increased monitoring list since 2018.

He also mentioned that the financial system in Pakistan had been used for either money or financing of terrorism in the past.

Pakistan has seen a boom in trading and mining cryptocurrency, with interest proliferating in thousands of views of related videos on social media and transactions on online exchanges.

While cryptocurrency is not illegal in Pakistan, the FATF has called on the government to better regulate the industry.

However, the SBP governor’s views have been increasingly against such currencies. He stated last month that cryptocurrency had more risks than benefits, but the central bank had been working to develop an understanding of the possible future currencies.

“In Pakistan, we as the central bank have reached a conclusion as of now that, for us and in terms of the core objectives of the central bank, the potential risks far outweigh the benefits,” he said during a speech he delivered at the Annual Investment Forum in Riyadh, Saudi Arabia.

Many large emerging markets, including China, India and Russia, had reached similar conclusions, whereas the approach in several advanced economies towards such virtual currencies had been more permissive, he said.

Published in Dawn, March 7th, 2022