Pakistan proposes SBP Act changes allowing dual nationals in top central bank roles.
Amendments to SBP Act would legalize digital currency as legal tender in Pakistan.
SBP set to manage currency in physical and digital forms under new proposed changes.
The federal government of Pakistan has proposed major amendments to the State Bank of Pakistan (SBP) Act. These changes have the potential to transform the governance structure of the central bank. They could also impact the nation’s approach to digital currencies.
The proposed amendments would allow dual nationals to serve as governor and deputy governor of the SBP. The changes would also legalize the use of digital currency, opening the way for cryptocurrencies like Bitcoin to become legal tender. The amendments await approval from the federal cabinet and Parliament.
Amendments Supporting Digital Currency
The amendments address digital currency, marking the first time such a concept is included in the SBP Act. Historically, the SBP has opposed digital currencies, issuing advisories against their use and dismissing related proposals. The proposed revisions redefine digital currency as a form issued by the central bank, making it legal tender as outlined in Section 25.
Section 24 gives the SBP the authority to issue banknotes. The proposed changes would extend this power to digital currency. This extension would allow the SBP to manage currency in both physical and digital forms. The amendment to Section 4C aims to empower the SBP to issue and oversee digital currency. This would enhance its regulatory functions. The changes also include plans for a subsidiary that would develop and operate digital payment systems.
Dual Nationality Restrictions Lifted
One of the notable changes involves revising Section 13 of the SBP Act. This section currently disqualifies individuals with dual nationality from holding top positions at the central bank. The finance ministry has now pushed for the removal of this restriction. This condition was introduced in January 2022. It came as part of broader amendments influenced by the International Monetary Fund (IMF) and the preferences of the former governor. However, the IMF did not explicitly recommend this limitation. The proposed change would allow dual nationals to serve as governor, deputy governor, and non-executive directors.
The amendment is needed at a time when Dr Inayat Husain, one of the current deputy governors with dual nationality, is nearing his term of service on November 8. The government wants to continue to employ him, considering him experienced or an important part of the SBP staff. If the government fails to act on the legislation soon enough, the two out of a three deputy governor seats will be empty.
Central Bank Digital Currency Business
Further proposed amendments in Section 17 would authorize the SBP to engage in central bank digital currency activities. Changes to Section 24 and related provisions align with this goal. These adjustments would grant the SBP the ability to manage, issue, and develop digital currency.
This would allow Pakistan’s central bank to oversee currency in both physical and digital forms. The initiative reflects the government’s shift toward embracing technological integration. It comes as discussions on digital finance and monetary regulation increase.
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