The State Bank of Pakistan has signed new legislation for e-money institutions (non-banks offering digital payment instruments) to ensure the timely issuance of a CBDC within the next three years. Regulators worldwide see central bank digital currencies (CBDCs) as an opportunity to enhance fiat capabilities by adopting the financial capabilities of the technologies that power cryptocurrencies. By announcing new rules to ensure the establishment of an internal CBDC by 2025, Pakistan added its name to that list. The State Bank of Pakistan (SBP) signed new legislation for Electronic Money Institutions (EMIs), non-banks offering instruments for digital payment systems, to ensure the timely issuance of a CBDC over the next three years. According to local Arab news media, the World Bank helped Pakistan draft the new regulations.
In addition to complying with the CBDC implementation schedule, the regulations ensure preventive measures against money laundering and terrorist financing, considering consumer protection and reporting obligations.
The state bank SBP will authorize EMI to issue CBDC. During the announcement, Finance Minister Asad Umar stated that using EMI to boost the digital economy will protect financial institutions from cybersecurity threats. SBP Deputy Governor Jameel Ahmad envisions CBDCs curbing fiat-bred corruption and inefficiency. He said, “These landmark regulations are a testament to SBP’s commitment to openness, technology adoption, and the digitization of our financial system.”
The onset of a fast-paced regulatory environment places Pakistan among nearly 100 countries actively researching and adopting CBDC initiatives. Neighboring country India recently joined the race to set up a local CBDC. The Reserve Bank of India (RBI) revealed an ambitious plan to start a retail CBDC pilot by the end of 2022 on November 22. First, the pilot will be tested—10,000 to 50,000 clients from the participating banks.