Pakistan Envisions a Transition from Traditional Paper Currency to Digital Currency

By Majid Anwar 13/10/2023 05:44 PM

SBP Announces the Launch of Pakistan’s First Digital Currency

The State Bank of Pakistan has announced its plan to make digital currency readily available for common payment usage in Pakistan by the year 2025. They named this strategic plan “SBP Vision 2028”. SBP also stated that it will help curb the flow of black money in the country and improve the economy and the value of the Rupee.

Digital Currency with Equal Legal Status as Paper Notes

The digital currency will have the same legal status as paper notes and will only be issued by the State Bank of Pakistan. The type of digital currency SBP has decided to introduce is “Central Bank Digital Currency (CBDC)”.

Reducing the Paper Currency Circulation

According to the government's plan, in the first phase, digital currency will be gradually introduced while reducing the circulation of traditional paper notes. The ultimate goal is to achieve 90% usage of digital currency and 10% usage of paper notes in the country.

Cryptocurrencies Are Banned in Pakistan, But Why CBDC now?

The Pakistan government has banned most cryptocurrencies, with the Finance and Revenue Minister stating they will not be legalized in Pakistan. CBDC digital currency, unlike cryptocurrencies, is regulated and issued directly by the central bank of a country.

Difference between CBDC and Crypto Currencies?

Central Bank Digital Currencies (CBDCs) are government-issued digital currencies regulated and controlled by the central bank of a country. They are legal tender, designed for official use, and typically pegged to the national currency. In contrast, cryptocurrencies like Bitcoin are decentralized digital assets created through block chain technology, operating independently of central authorities.

CBDC Will Be Cost Efficient For Pakistan

CBDC digital currency offers substantial cost savings by eliminating expenses tied to physical currency, allowing funds to be allocated to more critical areas. Through the launch of CBDC currency, the government aims to reduce inflation to the target level of 5-7%.

Enhanced Accountability

CBDC’s digital transactions will be thoroughly documented, empowering the Pakistani government to enforce monetary policies and combat financial irregularities more effectively.

SBDC’s Pilot Project ‘Sandbox’

The groundwork for the digital currency has been completed, and a pilot project called 'Sandbox' will soon be launched by the SBP to carefully test CBDC in the market in a limited and supervised manner.