Key Takeaways
- Pakistan’s SBP bank will issue licenses to EMIs for CBDC issuance
- Pakistan aims to launch an in-house CBDC by 2025.
- The World Bank helped Pakistan formulate the new regulations.
Central Bank Digital currencies(CBDCs) are now becoming increasingly popular around the world. According to local media reports, the State Bank of Pakistan (SBP) signed in laws issuing licenses to Electronic Money Institutions (EMIs) to ensure the timely issuance of a CBDC in the next three years. Electronic Money Institutions, an alternative to traditional banks, are companies licensed to provide financial services to third parties and store their funds on special segregated accounts.
Commenting on the latest development, Deputy Governor of SBP Jameel Ahmad said: “These landmark regulations are a testament to the SBP’s commitment toward openness, adoption of technology, and digitization of our financial system.” He further added that using EMIs in promoting the digital economy will safeguard financial institutions from cybersecurity threats. Reportedly, the World Bank helped Pakistan formulate the new regulations. Pakistan aims to launch an in-house CBDC by 2025.
Apart from the strict timeline adherence for the CBDC launch, the new regulations also include preventive measures against money laundering/terror financing while also paying heed to consider consumer protection and reporting requirements.
With this latest announcement, Pakistan has joined the growing list of countries to adopt CBDC into their monetary system. Earlier this month, neighboring country India’s Central Bank-The Reserve Bank of India(RBI) announced that it intended to launch a retail CBDC pilot by the end of 2022. The wholesale segment pilot for the digital rupee was launched by RBI on November 1. Its main use case has been the settlement of secondary market transactions in government securities.
As per reports, RBI’s retail digital rupee pilot deployment, which would first be tested among 10,000 to 50,000 consumers of participating banks, is now in its last stages of preparation.
Earlier this year, in June, the Bank of Jamaica-Jamaica’s central bank recognized “Jam-Dex” as a legal tender, thereby making the Caribbean nation the first country in the world to legalise CBDC. Many countries around the world are now actively pursuing CBDC initiatives as they believe it reduces cross-border transaction costs and enhances financial inclusion.
