Pakistan to Pilot Digital Currency with Japanese Firm

The State Bank of Pakistan (SBP) is collaborating with Soramitsu, a Japanese firm specialising in blockchain technology, to initiate a pilot program for a central bank digital currency (CBDC) later this year. This initiative marks a significant advancement in the nation’s digitisation efforts.

The digital Pakistani rupee pilot will leverage Soramitsu’s CBDC platform, supported financially by the Global South Future-Oriented Co-Creation Project, an initiative of Japan’s Ministry of Economy, Trade, and Industry.

Masato Toriya, an associate professor at Tokyo University of Foreign Studies and a Pakistan specialist, highlighted that a substantial number of transactions, even wage payments, in rural regions are conducted in cash, and the proportion of individuals with bank accounts remains limited.

The CBDC aims to mitigate the substantial expenses linked to cash distribution.

Soramitsu, the developer of Cambodia’s Bakong digital currency, considers the Pakistan project its most extensive undertaking to date, encompassing a population of 250 million and an economy valued at $400 billion.

The Tokyo-based entity is also innovating offline CBDC functionalities to facilitate smartphone transactions without requiring internet connectivity, positioning the project as a possible blueprint for other emerging economies.

Last month, SBP Governor Jameel Ahmad shared that the central bank is in the process of launching a digital currency pilot and is in the final stages of drafting legislation to govern virtual assets.

During the Reuters NEXT Asia summit in Singapore, Ahmad stated that Pakistan is actively “building up our capacity on the SBP digital currency” and anticipates a pilot launch shortly.

He also mentioned that forthcoming legislation will “lay down the foundations for the licensing and regulation” of the virtual assets industry and that the SBP has already engaged with potential technology partners.

Pakistan has recently intensified its initiatives to modernise its financial infrastructure with the establishment of the government-endorsed Pakistan Crypto Council (PCC) in March, with the objective of promoting virtual asset adoption.

The PCC is evaluating Bitcoin mining utilising surplus energy and has designated Binance founder Changpeng Zhao as a strategic advisor, in addition to planning the creation of a state-managed Bitcoin reserve.

The council has also engaged in discussions with crypto firms based in the United States, including World Liberty Financial, which has ties to Trump.

In May, the SBP clarified that virtual assets are not deemed unlawful. However, it cautioned financial institutions against engaging with them until a formal licensing structure is implemented.