Pakistan is exploring the use of blockchain technology to improve the international remittance transfer system, a key sector for the country’s economy.
Bilal bin Saqib, principal advisor to the Minister of Finance and member of the Pakistan Crypto Council (PCC), stated that this solution could reduce transfer times and costs.
Summary
How can blockchain transform the sector in Pakistan?
Every year, Pakistanis abroad send billions of dollars back home to support their families and contribute to the local economy.
In 2023-24, remittances exceeded 31 billion dollars, but the current system has high costs: fees can exceed 5% of the transferred amount.
Remittances represent a vital resource for many developing countries, acting as an economic cushion during crises and facilitating sustainable growth.
However, the traditional methods of transfer are often slow and expensive due to the presence of financial intermediaries.
The adoption of blockchain in the remittance sector could eliminate intermediaries, such as correspondent banks, and significantly reduce the cost of transactions.
A 2020 report by the OECD already highlighted the potential of blockchain to make remittances faster and more economical.
Bilal bin Saqib has stated that the PCC will analyze blockchain-based solutions to optimize fund transfers to Pakistan. In addition to this, the council will focus on:
- – Education and training on blockchain to develop new skills and create jobs in the technology sector.
- – Development of Web3 initiatives to encourage the adoption of innovative technologies. “`html
- – Support for a clear regulation to ensure compliance with international financial standards. “`
The regulatory context and the crypto industry in Pakistan
Despite the growing interest in blockchain, trading of cryptocurrencies and stablecoins has been banned in Pakistan since 2018. The State Bank of Pakistan (SBP) has indeed imposed restrictions that prevent financial institutions from facilitating transactions in crypto-assets.
However, Pakistan is among the five Asian countries featured in Chainalysis’s Global Crypto Adoption Index 2024. Many citizens use cryptocurrencies to protect themselves from inflation and currency exchange volatility.
“Despite the ban, there is a strong demand for digital assets,” emphasized Saqib. With over 60% of the population under 30 years old, the country has great potential in technological innovation.
For this reason, the PCC is committed to developing a clear regulatory framework to support the sector.
The Pakistan Crypto Council is also considering the possibility of tokenizing real assets and creating regulatory sandboxes to test new blockchain applications.
All this will take place in compliance with the standards of the Financial Action Task Force (FATF), the body that monitors money laundering and the financing of terrorism.
Pakistan was removed from the FATF grey list in 2022, after years of strict monitoring.
Saqib emphasized that one of the main objectives of the PCC is the creation of a transparent system compliant with international regulations, with particular attention to identity verification (KYC) and anti-money laundering (AML).
The debate on a strategic fund in Bitcoin
One of the main problems that Pakistan faces is the unregulated flow of cryptocurrencies abroad, which could exacerbate the shortage of dollars in the country.
Without clear regulation, crypto-assets can facilitate untraceable cross-border transactions, putting economic stability at risk.
For this reason, the first step of the PCC will be the introduction of clear and transparent regulation, requiring all crypto activities to comply with KYC and AML standards.
The global regulations on cryptocurrencies are changing, especially after Donald Trump, winner of the USA 2024 elections, announced the creation of a strategic reserve of Bitcoin based on seized assets.
However, Saqib clarified that a similar measure might not be suitable for Pakistan. The country still has a limited enforcement system, and illicit crypto assets are rarely intercepted on a large scale.
“The establishment of a strategic reserve would require an in-depth dialogue with the IMF and the FATF, to avoid compromising the international support obtained after exiting the gray list,” concluded Saqib.
Pakistan is taking the first steps towards the adoption of blockchain to improve the efficiency of international financial flows.
Thanks to the support of Web3 innovation and the possible regulation of the crypto sector, the country could position itself among the leaders of digital transformation in the region.
It remains to be seen which policies will be adopted to balance innovation and financial security, and whether blockchain will truly become the key tool to revolutionize the international remittance system.
