Federal Government Proposes SBP Act Amendments to Allow Dual Nationals in Top Roles and Legalise Digital Currency
ISLAMABAD — In a significant policy shift, the federal government has proposed a series of amendments to the State Bank of Pakistan (SBP) Act, which could pave the way for dual nationals to hold key positions within the central bank and introduce the legal use of digital currencies in Pakistan. The proposed changes, if approved by the federal cabinet and subsequently by Parliament, could mark a landmark shift for Pakistan, potentially making cryptocurrencies and digital currencies like Bitcoin legal tender.
Dual Nationals Eligible for Top SBP Roles
The Ministry of Finance has proposed approximately a dozen amendments to the SBP Act, vetted by the Ministry of Law, and submitted a summary for cabinet approval, signaling a new approach to financial policy. Among the key amendments is a provision to allow dual nationals to serve as SBP governor, deputy governors, and non-executive directors on the board.
This restriction was originally introduced in January 2022 as part of broader IMF-influenced amendments to the SBP Act. Although the IMF did not directly recommend the restriction on dual nationals, it was implemented during reforms favored by the former governor.
One proposed amendment would remove the phrase “having dual nationality” from Section 13, which currently disqualifies dual nationals from serving in senior SBP positions. This move is seen as an effort to address the limited talent pool for senior roles, with Finance Minister Muhammad Aurangzeb previously suggesting the need for flexibility on this requirement.
The timing of this amendment is significant. One of SBP’s deputy governors, Dr. Inayat Husain, a dual national, is set to complete his term on November 8. Dr. Husain’s expertise and substantial role within the SBP have reportedly made him a strong candidate for reappointment for a new five-year term.
Introducing Digital Currency as Legal Tender
The amendments also introduce provisions for digital currency in the SBP Act for the first time. The SBP, which has previously issued advisories against the use of virtual currencies such as Bitcoin and Litecoin, now appears poised to embrace digital currency as part of its formal mandate.
According to the proposed amendments, digital currency is defined as “a digital form of currency issued by the bank under Section 24 as legal tender under Section 25.” This change would give the SBP the authority to issue and regulate digital currency in Pakistan, whether in physical or digital form.
To facilitate this shift, the SBP plans to establish a subsidiary to oversee the development and operation of digital payment systems. Further amendments to Section 17 authorize the SBP to engage in “central bank digital currency” business, reflecting a more proactive stance on digital financial technology.
Historically, the SBP has warned against virtual currencies due to concerns over anonymity and potential for misuse. However, the new amendments propose penalties for unauthorized issuance of digital currency, with violators subject to fines amounting to double the illegal issuance value.
Expanding SBP Board’s Powers
The proposed amendments would also broaden the SBP board’s authority in financial reporting. A change to Section 9A would empower the board to approve the SBP’s annual report, half-yearly report, financial stability report, and other critical economic updates. Additionally, amendments to Section 9B would streamline board governance by allowing the chairperson or three non-executive directors, rather than any “member,” to call a board meeting.
Next Steps
These amendments signify a strategic shift in Pakistan’s financial policy landscape, reflecting the government’s intent to modernize the SBP’s role and align with emerging global digital finance trends. The proposed changes await federal cabinet approval, after which they will be presented to Parliament for final ratification.
