Govt Proposes Amendments to SBP Act to Legalize Digital Currencies in Pakistan

The federal government has proposed legalizing digital currencies in the country by making amendments to the State Bank of Pakistan (SBP) Act. The proposed amendments would allow the use of digital currencies, including cryptocurrencies, as legal tender. If approved, flagship coins such as Bitcoin could attain legal status. The proposed amendments also empower the SBP to issue and regulate digital currency directly, allowing it to manage them in both physical and digital forms. To define and regulate digital currency, new clauses would be added to the SBP Act for recognizing currencies as legal tender under central bank management. The amendments expand Section 24, which authorizes the issuance of banknotes, to include digital forms, which would enable SBP to operate and oversee digital payment systems. The bank may also establish a dedicated subsidiary to develop and manage these systems to ensure regulatory oversight and secure transaction frameworks. A new penalty clause has been proposed to deter illegal issuance of digital currency by imposing fines twice the value of any unauthorized issuance. Meanwhile, the amendments propose lifting the restriction on dual nationals serving as SBP Governor, deputy governors, and non-executive directors. Originally introduced in January 2022 as part of IMF-influenced reforms, this restriction on dual nationals is under reconsideration. The amendments also seek to change Section 9A to extend board powers to approve key financial reports, including the SBP’s annual and half-yearly reports, economic and financial stability reports, and banks’ financial statements. Moreover, changes to Section 9B would enable the board chairperson or three non-executive directors to convene meetings, streamline board operations, and clarify governance protocols.