Introduction

Islamabad, July 10, 2025 — In a groundbreaking move that could reshape Pakistan’s financial system, the State Bank of Pakistan (SBP) has announced plans to pilot a Central Bank Digital Currency (CBDC). This digital transformation is part of the broader modernization strategy aimed at aligning Pakistan’s economy with the digital world. Speaking at a panel discussion, SBP Governor Jameel Ahmad revealed that the bank is gearing up to roll out a pilot project for the CBDC, alongside efforts to regulate virtual assets through a new legal framework.

Understanding CBDCs

What is a Central Bank Digital Currency (CBDC)?

CBDC is essentially a digital form of a country’s official currency issued and controlled by the central bank. Unlike cryptocurrencies such as Bitcoin, CBDCs are fully backed by the state and have legal tender status.

Difference Between CBDC and Cryptocurrency

While both exist in the digital world, the differences are significant:

• CBDCs are centralized, regulated by the government.

• Cryptocurrencies like Bitcoin are decentralized, operating without a central authority.

Global Movement Towards CBDCs

Countries like China (with its digital yuan), India, Nigeria, and the UAE are all testing or have launched CBDC programs. The IMF and BIS have also urged nations to explore digital currencies for better financial transparency and inclusion.

Pakistan’s Vision for Digital Currency

SBP’s Governor Statement

Governor Jameel Ahmad emphasized that the SBP is not just watching from the sidelines but actively participating in the global financial shift. “We are building our capacity on the central bank digital currency and hope to roll out a pilot soon,” he remarked.

Capacity Building and Technological Readiness

The central bank is working closely with technology partners to ensure robust infrastructure. This includes cybersecurity protocols, system integration, and public awareness initiatives.

Learning from Global Trends

Pakistan’s approach mirrors best practices observed in other developing and developed economies—starting with a small-scale pilot before scaling up.

Digital Currency Pilot Program

What Will the Pilot Involve?

The pilot phase will likely include:

• Selected banks and payment service providers

• Limited retail and wholesale testing

• Monitoring of transaction speeds, costs, and security

Goals and Expected Impact

• Reduce cash dependency

• Enhance transaction transparency

• Improve cross-border remittances

• Boost financial inclusion

Possible Challenges and Risks

• Public mistrust in digital systems

• Infrastructure gaps in rural areas

• Cybersecurity concerns

Virtual Assets Regulation in Pakistan

The Virtual Assets Act, 2025

This new legislation is a game-changer. Recently approved by the government, it:

• Defines virtual assets and their classification

• Sets licensing protocols for exchanges and wallets

• Establishes penalties for non-compliance

Independent Regulatory Authority Setup

An autonomous body will oversee all crypto-related activities. It will ensure that innovation doesn’t come at the cost of financial security.

Tech Partnerships and Legal Infrastructure

The SBP is aligning with blockchain firms and legal advisors to create a robust ecosystem for digital assets.

Role of Pakistan Crypto Council (PCC)

Launch and Objectives of PCC

Founded in March 2025, the PCC is tasked with:

• Promoting blockchain literacy

• Advising the government

• Driving crypto innovation

Collaborations and Global Outreach

The PCC has already engaged with major global players, including Binance founder Changpeng Zhao and World Liberty Financial, to bring best practices into the local market.

Vision for State-Run Bitcoin Reserve

A state-backed Bitcoin reserve is also under discussion—something that could position Pakistan as a future leader in crypto asset holdings.

Risks and Rewards of the Digital Shift

Financial Inclusion and Innovation

Digital currencies could help unbanked populations access financial services through mobile-based platforms, driving inclusion.

Managing Cybersecurity and Fraud Risks

With the increase in digital assets, risks of scams and fraud also rise. Strong regulation and education will be key.

Balancing Regulation with Growth

Pakistan’s challenge will be to encourage innovation without allowing unchecked speculation or financial instability.

Economic Environment Around the Announcement

SBP’s Tight Monetary Policy

Governor Ahmad stated that the central bank has maintained a strict monetary stance, aiming to keep inflation between 5% to 7%.

Declining Inflation and Interest Rates

• Inflation dropped from a staggering 38% in May 2023 to 3.2% in June 2025

• Interest rates fell from 22% to 11%, reflecting macroeconomic stability

Impact on Financial Market Stability

The tight policy has helped stabilize both domestic prices and the exchange rate, creating an ideal backdrop for digital innovation.

Forex Reserves and Debt Strategy

Dollar Exposure and Eurobond Share

Pakistan is shielded from extreme dollar volatility, with only 13% of foreign debt in Eurobonds and commercial loans.

Current Status of Foreign Exchange Reserves

The country’s reserves have increased dramatically, reaching $14.5 billion, a strong buffer for external shocks.

Public and Institutional Response

Reactions from Banks and Fintech Firms

Banks are cautiously optimistic but waiting for the regulatory framework to be finalized. Fintech firms see massive potential in the digital currency space.

Public Sentiment and Adoption Challenges

Awareness and trust are the main hurdles. A well-structured campaign will be essential to drive user adoption.

Future Outlook

Long-Term Goals of SBP

The SBP hopes to:

• Lead South Asia in digital currency adoption

• Reduce reliance on physical cash

• Establish a regulatory benchmark for crypto

Positioning Pakistan in Global Fintech Landscape

With the right strategies, Pakistan could become a hub for digital innovation in Asia, attracting investment and talent.

Conclusion

The State Bank of Pakistan’s digital currency pilot and the passing of the Virtual Assets Act mark a historic shift in the nation’s financial landscape. This isn’t just a technological upgrade—it’s a strategic move toward greater inclusion, innovation, and economic sovereignty. While challenges lie ahead, Pakistan appears ready to take a bold leap into the digital future.

FAQs

1. What is the purpose of the SBP launching a digital currency?

The goal is to modernize the financial system, reduce cash usage, improve transaction transparency, and boost financial inclusion.

2. Is cryptocurrency legal in Pakistan now?

Cryptocurrency is not banned. However, financial institutions are advised to wait until the new licensing framework is fully in place.

3. How will the Virtual Assets Act, 2025 affect investors?

The Act introduces a licensing regime that offers legal clarity, investor protection, and sets the foundation for safe crypto participation.

4. What is the Pakistan Crypto Council doing?

The PCC is promoting crypto adoption, advising on policy, engaging global partners, and even exploring the creation of a state Bitcoin reserve.

5. When will the CBDC pilot launch?

The SBP has not given a fixed date but stated that the pilot will be launched “soon,” following completion of preparatory work.