Pakistan is getting closer to launching its first digital central bank currency (CBDC) through a partnership with Soramitsu, a Japanese blockchain software developer.
According to local sources, the joint pilot project between Soramitsu and the State Bank of Pakistan (SBP) will be completed by the end of 2025.
Soramitsu partnering with the SBP
By choosing Soramitsu as its technical partner, the Pakistan is banking on one of Asia's most established blockchain developers. The company's best-known project is its collaboration with Cambodia's central bank to develop the Bakong digital currency, currently the country's first CBDC.
The partnership, also supported by funds from Japan's Ministry of Economy, Trade and Industry, is part of the Global South Future-Oriented Co-Creation Project initiative.
According to Asia Law, Masato Toriya, an expert on Pakistan and researcher at the Tokyo University of Foreign Studies, explained that the country is a 'cash-based society', where even wages are paid in cash and the penetration rate of bank accounts is low. As a result, Pakistan faces "high costs to circulate" the large amount of cash in use.
"The use of a CBDC will help reduce these costs and improve financial inclusion, with a pilot project focused initially on the population of 250 million people and a $400 billion economy."
Soramitsu develops an offline CBDC
Soramitsu is already working on offline functionality for its CBDC, allowing users to transact via smartphones without having to be constantly connected to the Internet. This could make the Pakistani CBDC an attractive option for many developing countries, where connectivity is intermittent and unreliable.
If the pilot project is successful, it could become a role model for other emerging markets in the future.
SBP Governor Jameel Ahmad said in July that a law to regulate virtual assets was being worked on and that preparations for the launch of the pilot CBDC were being finalised. Speaking at the Reuters NEXT Asia Summit in Singapore, Ahmad added that the SBP aims to "strengthen its expertise" and create a "regulatory framework for licensing virtual assets".
Cryptocurrencies increasingly accepted in Pakistan
The central bank is not the only government body engaged in developing initiatives to foster cryptocurrency adoption.
In March, the government announced the creation of the Pakistan Crypto Council, tasked with developing use cases for virtual assets in the country. Included in the business plan was bitcoin mining by exploiting surplus energy. The Pakistan Crypto Council has also initiated meetings with important figures in the industry, including Binance.
Virtual assets in Pakistan are not yet regulated, but the SBP, in a July 2021 notice, made it clear that cryptocurrencies are not illegal. However, financial institutions have been advised not to participate until official guidelines are issued.
