- Regulatory framework designed by central banks could lead to smooth transition without creating chaos
Pakistan ranks third on the crypto market platform and has no shortage of tangible resources to make its presence felt on the institutional medium of digital finances. It has tapped into the next-generation door of financing by opening new avenues of cooperation in cryptocurrency. Binance, the world’s leading global blockchain ecosystem and cryptocurrency exchange by trading volume and users and Fauji Foundation have signed a Letter of Intent (LOI) in Islamabad to explore potential commercial collaboration on blockchain, cryptocurrency, payments, and Web 3.0 ecosystem within Pakistan.
The MoU signed with Binance will see an endowment of up to $2 billion in the form of sovereign bonds, T-bills and commodity reserves. As part of the LOI, Binance will deploy its expertise, advisory support, and technological and market insights on the crypto industry, and Fauji Foundation will partner with Binance on payment infrastructure solutions utilizing digital assets.
Although cryptocurrency remains a legal grey area as the central bank says digital currencies are not recognized as legal tender but in order to make efforts to put Pakistan on the map of crypto are fruitful, legislation and safeguards need to be in place. It also necessitates educating the masses to dispel fears and reservations. The strength of Pakistan lies in the fact that it has the required human talent and the governmental patronage. Hence, under the Fauji-Binance agreement, both sides will promote cryptocurrency and blockchain education through industry-academia linkage reaching learners across Pakistan. The goal is to equip young people with the skills needed to work in the industry and to help them become responsible, well-informed users of blockchain, cryptocurrency, payments, and Web 3.0 products and services.
In an effort to institutionalize the digitization of the economy, Pakistan has enabled tokenization and blockchain-based distribution of its real-world assets. The government has already taken initiative to allocate 2000 MW of electricity for Bitcoin mining and AI data centres and this new cooperation with Binance must also move forward. The nod to Binance and HTX, a digital-asset platform, will see regulators set up local subsidiaries and begin preparations for full exchange license applications. However, in order to reap the benefits of this game changing technology, the keywords to strive ahead are transparency and due international market access.
Since people are willing to adapt to digital currencies and technology is ready to accept operational challenges, it all depends on the regulatory framework designed by central banks which could lead to smooth transition without creating any chaos. A prudently designed Central Bank Digital Currency (CBDC) could address the volatilities of unregulated crypto currencies and could potentially offer more resilience and safety, greater availability and lower costs. At present, there are some 100 countries that are researching and testing CBDCs while some have even started distributing it to the public. It is pertinent to mention that central banks around the world need to see themselves as enablers or promoters of digital currencies. Enactment and enforcement of regulations is one thing but they also need to proactively engage with all stakeholders including private sector. Only then could the vision of financial inclusion be fulfilled in a rapidly evolving digital space.