The federal government has put forward a proposal to legalize digital currencies in Pakistan by amending the State Bank of Pakistan (SBP) Act. These amendments would allow digital currencies, including cryptocurrencies like Bitcoin, to be recognized as legal tender.

The proposed changes would empower the SBP to issue and regulate digital currencies directly, managing them in both physical and digital forms. This initiative includes expanding Section 24 of the SBP Act, which currently authorizes the issuance of banknotes, to encompass digital forms. This expansion would enable the SBP to operate and oversee digital payment systems, potentially through a dedicated subsidiary to ensure regulatory oversight and secure transaction frameworks.

To deter illegal issuance of digital currency, a new penalty clause has been proposed, imposing fines twice the value of any unauthorized issuance.

Additionally, the amendments suggest lifting the restriction on dual nationals serving as SBP Governor, deputy governors, and non-executive directors. This restriction, originally introduced in January 2022 as part of IMF-influenced reforms, is now under reconsideration.

The amendments also propose changes to Section 9A, extending board powers to approve key financial reports, including the SBP’s annual and half-yearly reports, economic and financial stability reports, and banks’ financial statements. Furthermore, modifications to Section 9B would allow the board chairperson or three non-executive directors to convene meetings, thereby streamlining board operations and clarifying governance protocols.