Islamabad: In a major policy shift, the federal government has proposed amending the State Bank of Pakistan (SBP) Act to pave the way for legalizing digital currencies, including cryptocurrencies. The proposed changes, if approved, would recognize digital currencies as legal tender in Pakistan, with flagship cryptocurrencies like Bitcoin potentially gaining legal status.
The proposed amendments are set to empower the SBP with the authority to directly issue and regulate digital currency, enabling it to manage currency in both physical and digital formats. The SBP would oversee the circulation and regulation of digital currencies, integrating them within the country’s financial systems.
To accommodate these changes, new clauses would be added to the SBP Act to formally recognize digital currencies as legal tender under the central bank’s jurisdiction. The amendments also expand Section 24, which currently authorizes the issuance of physical banknotes, to include digital currencies. This would allow SBP to operate and supervise digital payment systems, with provisions to establish a dedicated subsidiary focused on developing and managing these systems. The subsidiary would ensure regulatory oversight, security, and transparent frameworks for digital transactions.
To deter illegal issuance, a penalty clause is included, proposing fines twice the value of any unauthorized digital currency issuance.
In addition to digital currency regulation, the government has proposed lifting the restriction on dual nationals from serving as the SBP Governor, deputy governors, and non-executive directors. This restriction, initially introduced in January 2022 under International Monetary Fund (IMF)-influenced reforms, is under reconsideration.
Other amendments to the SBP Act aim to improve governance and reporting protocols. Revisions to Section 9A would grant the SBP board enhanced powers to review and approve key financial reports, such as the bank’s annual and half-yearly reports, economic stability assessments, and financial statements. Changes to Section 9B are also proposed to allow the board chairperson or three non-executive directors to call meetings, simplifying board procedures and clarifying governance processes.
If these amendments pass, Pakistan could be one of the few countries to formally integrate digital currencies within its financial regulatory framework, marking a significant step toward financial innovation and inclusion in the region.
