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The government’s decision to introduce digital currency aims to achieve cost savings by eliminating the need for currency printing and distribution expenses.
Moreover, the adoption of digital currency is expected to contribute to the strengthening of the rupee, fostering economic growth, and streamlining large financial transactions.
This digital currency will be pegged to the Pakistani rupee, mirroring the relationship between the Chinese digital currency and the Chinese Yuan, with a one-to-one equivalence.
Pakistan’s Official CBDC to Be Issued by State Bank:
The State Bank of Pakistan (SBP) is responsible for the issuance of the Pakistani digital currency, following a structure similar to traditional currency notes. The SBP has initiated collaboration with experts to facilitate the implementation of digital currency.
A specialized department, the CBDC, is conducting a thorough analysis of the cost-effectiveness and feasibility of digital currency to ensure seamless transactions upon its introduction.
The government’s plan entails a gradual shift from paper currency notes to digital currency, maintaining an 80:20 ratio, ensuring accessibility to currency notes as an alternative in emergencies. This implies that 80% of the currency will remain in paper form, while the remaining 20% will transition into digital form.
The benefits of this transition include reduced expenses associated with currency note production, transportation, and disposal. Additionally, digital currency transactions will be meticulously documented, facilitating more effective monetary policy enforcement.
Digital currency holds the potential to simplify cross-border trade and expand financial services accessibility to unbanked populations. According to the World Bank, it has the capacity to significantly enhance the financial industry’s efficiency, resilience, and reliability. One notable example of distributed ledger technology is block chain.
CBDCs: A Safer Bet Than Cryptocurrencies for Digital Transactions
Central Bank Digital Currencies (CBDCs) offer heightened security in comparison to cryptocurrencies and are specifically designed to work alongside conventional physical cash and established electronic payment methods.
These currencies are underpinned by block chain technology (DLT) and are crafted to furnish a secure and streamlined avenue for executing digital transactions.
- At present, Nigeria, Jamaica, and the Bahamas have introduced their Central Bank Digital Currencies (CBDCs), while China, India, Saudi Arabia, France, and Ghana are conducting pilot programs.
- Cybersecurity experts emphasize that the implementation of a sandbox environment for testing and establishing digital currency standards would represent a significant milestone for Pakistan’s central bank.