Pakistan Doesn’t See ‘Use Case’ for Crypto to Achieve Financial Inclusion

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In Brief
  • The State Bank of Pakistan does not see use case for cryptocurrency.

  • The benefits of cryptocurrencies outweigh the risks.

  • Blockchain technology has potentials to solve many problems of the financial sector.

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The central bank of Pakistan is not likely to approve cryptocurrencies as legal tender in the country, as its governor does not see any use case for digital currencies to promote financial inclusion or innovation.

Speaking at the 13th Karachi Litera­ture Festival, State Bank of Pakistan (SBP) Governor Reza Baqir said that while blockchain, the underlying technology behind cryptocurrencies, has potential uses to solve many challenges faced by the financial sector, including financial access, inclusivity and innovation are not one of them.

“When we look at the value proposition offered by crypto right now, the use cases that have been brought forward have just been exchanges,” Baqir said. Some sectors are pushing to regulate Bitcoin to speculate on digital assets and transfer money across borders.

He continued, “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 judgment whether the benefits outweigh the risks with regards to the use of cryptocurrencies in Pakistan.”

In addition, Baqir expressed doubt over the seeming lack of visibility in digital assets, particularly the transactions that are vulnerable to abuses.

The SBP Governor went on to say, “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 explained that banking regulators like the SBP are tasked to promote financial inclusion and prevent any actors from abusing the financial system. This is more apparent that Pakistan is placed on the grey list by the Financial Action Task Force (FATF), an intergovernmental organization founded in 1989 to develop policies to combat money laundering.

He added that the country is also trying to move away from its bad image after criminal elements used its financial system for money laundering or financing terrorist activities.

The SBP is the latest central bank that has joined the growing list of banking regulators to reject cryptocurrencies as a means of exchange.

Malaysia’s Deputy Finance Minister II Yamani Hafez Musa said that digital assets “do not exhibit characteristics of money” and added that cryptocurrencies are not a suitable payment method for the country.

“Digital assets such as Bitcoin and Ethereum are not suitable to be used as a payment instrument as these assets do not exhibit characteristics of money,” he said.

And in February, the Reserve Bank of India said it would not accept crypto assets as a legal tender in India.

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Komfie Manalo is a journalist with 30 years of experience in print, digital, TV, and radio. He has covered the police, disasters, business, finance, technology, fintech, blockchain, and cryptocurrencies.

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