Pakistan

Pakistan banks agree on blockchain-based KYC system development

The blockchain-based national eKYC banking platform aims to strengthen Anti-Money Laundering capabilities while countering terror financing.

The Pakistan Banks’ Association (PBA) — a group of 31 traditional banks operating in Pakistan — signed off on developing a blockchain-based Know Your Customer (KYC) platform. 

On March 2, the PBA signed the project contract to develop Pakistan’s first blockchain-based national eKYC banking platform, as reported by the Daily Times. The move aims to strengthen Anti-Money Laundering capabilities while countering terror financing — an initiative led by the State Bank of Pakistan (SBP).

The member banks include international establishments such as the Industrial and Commercial Bank of China, Citibank and Deutsche Bank. Moreover, the blockchain platform will improve operational efficiencies, primarily aimed at improving customer experience during onboarding.

The Avanza Group has been tasked to develop the blockchain-based eKYC platform named “Consonance,” which will be used by member banks to standardize and exchange customer data via a decentralized and self-regulated network. However, the customer details will be shared based on consent — allowing banks to assess existing and new customers.

Related: India explores offline functionality of CBDCs — RBI executive director

Joining other countries in the race to develop a central bank digital currency (CBDC), Pakistan recently signed new laws to ensure the launch of a CBDC by 2025.

Global CBDC initiatives overview. Source: Atlantic Council

The SPB will issue licenses to electronic money institutions for CBDC issuance. “These landmark regulations are a testament to the SBP’s commitment toward openness, adoption of technology and digitization of our financial system,” said Deputy Governor of SBP Jameel Ahmad.

Pakistan launches new laws to expedite CBDC launch by 2025

The State Bank of Pakistan signed in new laws for Electronic Money Institutions — non-bank entities offering digital payment instruments — to ensure the timely issuance of a CBDC in the next three years.

Regulators worldwide see central bank digital currencies (CBDCs) as a way to enhance fiat capabilities by inheriting the financial prowess of technologies that power cryptocurrencies. Pakistan joined this list by announcing new regulations to ensure the launch of an in-house CBDC by 2025.

The State Bank of Pakistan (SBP) signed in new laws for Electronic Money Institutions (EMIs) — non-bank entities offering digital payment instruments — to ensure the timely issuance of a CBDC in the next three years. The World Bank helped Pakistan design the new regulations, according to local media Arab News.

In addition to timeline adherence for the CBDC launch, the regulations warrant preventive measures against money laundering and terror financing while considering consumer protection and reporting requirements.

Global CBDC initiatives overview. Source: Atlantic Council

The state bank, SBP, will issue licenses to EMIs for CBDC issuance. During the announcement, Finance Minister Asad Umar stated that using EMIs in promoting the digital economy will safeguard financial institutions from cybersecurity threats. Deputy Governor of SBP Jameel Ahmad envisions curbing fiat-induced corruption and inefficiency through CBDCs. He said:

“These landmark regulations are a testament of the SBP’s commitment toward openness, adoption of technology and digitization of our financial system.”

The commencement of a speedy regulatory environment places Pakistan among the nearly 100 countries that are actively involved in researching and launching CBDC initiatives.

Related: India’s central bank outlines digital rupee CBDC plans

Neighboring country India also recently joined the race to launch a home-grown CBDC. On Nov. 22, The Reserve Bank of India (RBI) announced an ambitious plan to launch a retail CBDC pilot by the end of 2022.

Indian central bank, RBI, is reportedly in the final stage of preparing the retail digital rupee pilot rollout, which will be initially tested among 10,000 to 50,000 users of participating banks.