Pakistan State Bank Governor on Fintech, Digital Currency and Stripe

State Bank of Pakistan is studying the issuance of central bank digital currency (CBDC), according to the country's central bank chief Dr. Reza Baqir. Recognizing Pakistan's growth potential, the San Francisco-based Stripe, valued at $95 billion, has recently invested in Safepay, a fintech startup in Karachi, Pakistan. Dr. Baqir spoke of both of these developments in an interview with CNN's Julia Chatterly. 

Central Bank Digital Currency (CBDC):

China's central bank is testing its digital currency in several major Chinese cities. The chairman of the US Federal Reserve has recently confirmed that the US Central Bank is working on digital dollar. The State Bank of Pakistan announced in 2019 that it was developing a digital currency. It seems that the popularity of Bitcoin has triggered serious worries of loss of control of the official financial systems among the central bankers around the world. China's substantial lead in digital currency could put it far ahead of the US in the future of global payments and financial settlement. It could eventually displace the US dollar and provide China with the immense global financial power that the US currently enjoys. 

Dr. Reza Baqir has recently confirmed to CNN what a top official of the State Bank of Pakistan, the nation's central bank, announced in April 2019: the institution aims to issue a digital currency (Central Bank Digital Currency or CBDC) by 2025.  Speaking at the launch of regulations of Electronic Money Institutions (EMIs), central bank officials said in 2019 that EMIs will be non-bank entities to be licensed by the central bank to issue e-money for the purpose of digital payments. Pakistan's finance minister Asad Umar and the central bankers said they are targeting Pakistan's economy to go fully digital by 2030. Here's what Governor Reza Baqir told CNN's Julia Chatterly:
“The benefit for us is twofold: Not only does [potential CBDC issuance] give another boost to our efforts for financial inclusion but, second, if the central bank issues a digital currency, it allows us to make further progress in our fight towards Anti-Money Laundering, towards countering terrorism financing. So, we are at a stage where we are studying it. We hope to be able to make an announcement on that in the coming months.” 
More recently, the State Bank of Pakistan launched Raast, a digital payment system.  It is essentially a pipe that is intended to connect government and financial institutions with consumers and merchants with each other to process payments instantly at very low cost. Raast will be boosted by Pakistan government's decision to use it to pay salaries, pensions and pay welfare recipients under Benazir Income Support and Ehsaas Emergency Cash programs. 
Stripe's Entry in Pakistan:
Stripe, a San Francisco fintech firm valued $95 billion, announced last month that it is entering the Pakistan market with an investment in Karachi-based Pakistani startup Safepay. Founders Ziyad Parekh and Raza Naqvi told Rest of World that they were taken aback by the interest from fellow Y Combinator alumni Stripe. “We were not expecting it and were really intrigued, as they have been a huge inspiration for us,” said Naqvi.“They (Stripe’s founders) understand that partnering up with people who are ambitious and want to tackle a problem is a much better way to enter a market than kind of going in there without any context,” he added. “At a founder-to-founder level, we spoke, and they understood what our vision was.”  
The State Bank of Pakistan recently launched Raast, a digital payment infrastructure that represents a great leap forward for the use of financial technology (FinTech) and financial inclusion in the  country.  It will also promote e-commerce in Pakistan. Undocumented economy poses a serious threat to the country because it creates opportunities for criminal activities and tax evasion.  Raast is part of the government's effort to modernize payment systems and document the nation's cash-based informal economy. 
Pakistan's Potential:
Pakistan is the world's 5th largest population with young demographics offering tremendous growth opportunity. Broadband subscriptions in the country have soared from 2 million in 2012 to 100 million now, according to the nation's telecommunications regulator. Ookla, recognized globally for its broadband speed testing, reports that Pakistan's average broadband download speed is 11.35 Mbps, while its upload speed stands at 10.7 Mbps. Thousands of kilometers of new fiber optic cable is being installed and mobile data usage in Pakistan has recently surged to 8,000 petabytes. Smartphone sales are also swelling. All signs are pointing to Digital Pakistan becoming reality in the near future. 
Pakistan's economy is overwhelmingly cash-based. More than half the population is unbanked. It offers a great untapped market for financial technology firms. Pakistan is also promoting digital payments to enhance financial inclusion and document the economy. Eliminating  interbank digital transaction fees during the covid pandemic has resulted in 100%-200% jump in such transactions.  

Summary:

Speaking with CNN"s Julia Chatterly, the State Bank of Pakistan Governor Reza Baqar said the Pakistani government is currently studying the idea of issuing central bank digital currency (CBDC). China is showing Pakistan the way with its CBDC. There will be an announcement on the country's CBDC in the next several months. Because CBDC is issued by the central bank, it can help the country fight crime and corruption. Pakistan is also promoting digital payments to enhance financial inclusion and document the economy. Eliminating digital payment fees during the covid pandemic has resulted in 100%-200% jump in such transactions. He said fintech companies and digital payment processors like Stripe are welcome to operate in Pakistan. It has the world's 5th largest population with young demographics offering tremendous growth opportunity.

Here's a brief video of Dr. Reza Baqir's CNN interview with Julia Chatterly:

http://www.youtube.com/embed/BZ8MAi-_Qb4"; title="YouTube video player" width="560"></iframe>" height="315" src="https://img1.blogblog.com/img/video_object.png" width="560" style="cursor: move; background-color: #b2b2b2;" />

Views: 308

Comment by Riaz Haq on August 8, 2022 at 5:59pm

U.S. Lawmakers Look to Digital Dollar to Compete With China
The Federal Reserve is considering the idea, but in no rush to join a digital-assets space race

https://www.wsj.com/articles/u-s-lawmakers-look-to-digital-dollar-t...

Lawmakers are pushing the Federal Reserve to move swiftly toward issuing a digital dollar, to combat steps from China and others they say could one day threaten the U.S. status as the global reserve currency.

The bipartisan group of lawmakers, including Reps. Maxine Waters (D., Calif.) and French Hill (R., Ark.), has sought for the U.S. to counter global competitors launching digital versions of their currencies. The House Financial Services Committee, which both serve on, might vote on related legislation as soon as next month.

Ms. Waters has framed competition over new forms of central-bank money as “a new digital assets space race.” The Biden administration and the Fed don’t share a sense of urgency.

-----------

Fed Chairman Jerome Powell has indicated the central bank isn’t in a rush, as it confronts inflation and a slowing economy. Mr. Powell has said it is more important to get the digital dollar right than to be first to market, in part because of the dollar’s critical global role. He has also said the Fed won’t issue a digital dollar without support from elected officials. The White House has largely remained neutral on a digital dollar, with President Biden ordering a study to determine its implications for issues such as economic growth and stability.

---------------

Some in Congress say the U.S. is already behind the curve. Among the Group of 20 major economies, 16 are in the development or pilot phase of a digital currency, according to the Atlantic Council, a Washington think tank. The European Central Bank, on behalf of countries including Germany and France, is exploring designs for a digital euro and preparing to launch a test pilot.

Mr. Hill, the Arkansas Republican, said his concerns were animated in part by China, which began real-world testing of its own central-bank–issued digital currency in 2020. In an interview, he said China’s lending practices in the developing world could make it easier for the country to promote international uses of its digital currency—a potential threat to the dollar-based global economy.

--------

“We should be concerned about China’s predatory practices,” he said.

Chinese authorities haven’t ruled out international use of the e-CNY, the official name for the country’s digital currency, but say it is designed for small-scale domestic use by consumers.

Analysts are looking for signs that the People’s Bank of China will take concrete steps to join with central banks elsewhere to make it possible to use digital currencies between countries. The bottom line is that Beijing is uncomfortable with the outsize role the U.S. dollar plays in global commerce and in particular fears being frozen out of the dollar-based financial system, such as in response to a conflict over Taiwan.

International transactions in a digitized currency created by China, the thinking goes, could be a defensive weapon in such circumstances because they would happen beyond the reach of the U.S.

Comment by Riaz Haq on December 6, 2022 at 10:40am

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.

https://cointelegraph.com/news/pakistan-launches-new-laws-to-expedi...

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.

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:

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

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.

Comment by Riaz Haq on June 7, 2023 at 9:57am

Pakistani official praises innovation as UAE-based bank opens country’s first ‘digital lifestyle branch’

https://www.arabnews.pk/node/2315156/pakistan


Launched by Bank Alfalah, the branch seeks to provide unique digital experience and meet customers’ financial needs

Among other facilities, the branch will also provide biometrically secured digital lockers that will remain available 24/7


The top central bank official in Pakistan has praised the country’s financial sector for making technological upgrades after a private commercial bank inaugurated its first “digital lifestyle branch” in the southern Karachi port city to improve the overall customer experience and reduce the brick-and-mortar footprint earlier this week.

Launched by Bank Alfalah, a Pakistani subsidiary of a company based in the United Arab Emirates (UAE), the initiative seeks to provide a unique digital experience and meet the lifestyle and financial needs of customers.

According to the bank, the state-of-the-art branch will offer a 24/7 digital self-service banking area comprising a virtual self-service machine (VSM), biometrically secured digital lockers, cash-deposit machines (CDMs), auto-teller machines (ATMs), and tech-gadget machines along with round-the-clock Wi-Fi access, among other facilities.

The branch was launched in Karachi by Pakistan’s top central bank official on June 1.

“Governor State Bank of Pakistan (SBP) Mr. Jameel Ahmad has said that Pakistan’s banking industry was investing in technological upgrades to facilitate its customers and improve their overall banking experience,” said a statement circulated by the bank.

“He was optimistic that exciting projects like Bank Alfalah’s first digital lifestyle branch will unlock new opportunities, making banking easier to access and leading to a more financially inclusive and digitally empowered nation.”

According to the statement, Ahmad said that digitalization would entail a reduction in the brick-and-mortar footprint of the banking industry globally, adding that Pakistan was no exception.

“The governor of SBP was confident that the successful implementation of this model will show the way forward to the new entrants of the banking industry in Pakistan. In his concluding remarks, he stressed the need for a proactive approach by the banking industry in tailoring customers’ products and services based on their specific preferences and changing behavior,” it added.

The top SBP official further maintained that customers’ fair treatment and protection should be a top priority of banks.

The virtual self-service machine will allow customers to instantly open accounts, receive debit cards swiftly, and get statements printed by a video teller immediately after a transaction, the bank said.

The facility will also provide “easy-to-use and biometrically secured digital lockers” which will be accessible to customers at any time of the day or night without any staff interaction.

Bank Alfalah witnessed an exponential growth of over 95 percent in digital banking transactions with an annualized volume of over Rs3.5 trillion. The bank’s record further reveals that 77 percent of new-to-bank (NTB) account holders prefer digital transactions over conventional methods.

Over 75 percent of the bank’s transactions are now online, and 70 percent of bank accounts are opened via digital channels.

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