THOUGH the majority of the global financial community has wholeheartedly embraced the promise of cryptocurrencies, Pakistan’s central bank has been rather defensive about engaging with this new mode of global payments. To be fair, it has several good reasons to view cryptocurrencies with suspicion: for one, they offer a sophisticated degree of anonymity and are completely decentralised and unregulated by any authority. In short, they challenge the very existence of institutions like the State Bank. However, this does not mean that the ideas underpinning them, especially blockchain technology, should not be explored and adapted as global commerce increasingly moves online. It is encouraging, in this respect, to note that the SBP is studying the possibility of introducing its own digital currency pegged on derivative financial instruments. Shoukat Bizinjo, the additional director of the SBP’s Digital Financial Services Group, has been quoted as saying at a recent mobile commerce conference that the SBP has been consulting with other central banks in this regard.
The SBP has for long deemed trading and investing in cryptocurrencies illegal. Just weeks ago, Minister of State for Finance and Revenue Aisha Ghaus Pasha told a Senate committee that cryptocurrencies “will never be legalised” in Pakistan. Yet, the long-running suspicion at official levels could not prevent Pakistan from becoming the sixth country in the Global Crypto Adoption Index released by Chainalysis in 2022. With the rupee in freefall, the economy in disrepair and the citizenry increasingly pessimistic about their future prospects, many more citizens have, in recent months, taken to buying cryptocurrencies to protect their wealth against forex fluctuations or to trade them to make dollar profits. The SBP, which on the one hand seems open to adopting cryptocurrency technologies, should not prevent ordinary people from capitalising on them to make financial gains. More work and understanding are indeed needed to understand the dynamics of this market, but a ban is no answer.
Published in Dawn, June 3rd, 2023