Aurangzeb for open-minded approach to cryptocurrency

KARACHI: Finance Minister Muhammad Aurangzeb Monday said Pakistan should adopt an open-minded approach to advancing digital assets, including cryptocurrency, to build a strong digital economy.

“The reality is that crypto is already in vogue here in the informal market and the numbers are what they are; even if they are one-fourth of what the numbers are being moved around, we need to think through and be ahead of the cycle in terms of the regulatory regime and think on how to move forward with AI [artificial intelligence] and digital assets (in Pakistan),” he said at the two-day Pakistan Banking Summit 2025.

The event was organised by the Pakistan Banks Association (PBA). According to the minister, digital banking, which is quicker and more sustainable, is the way of the future for the finance industry.

Reflecting on insights from the Emerging Market Economies Conference held in AlUla, Saudi Arabia, he highlighted that most emerging markets were on their transformation journey. These markets are currently deliberating on AI and digital assets to improve financial inclusion and digital banking within their nations.

“I have talked about cryptocurrency in the context of the emerging markets where people are looking at AI and digital assets more broadly and how we are looking at it here. Regulation [regulatory regime] remains the subject of the central bank. From my perspective, we should approach it with an open mind,” Aurangzeb told reporters following his address at the summit.

The minister’s remarks coincide with the State Bank of Pakistan’s (SBP) efforts to introduce a central bank digital currency (CBDC).

Over the past two years, the SBP has been studying global developments and learning from the technological frameworks adopted by other countries regarding digital currency. In January this year, Pakistan introduced a private member’s bill, the “Virtual Assets Bill 2025,” aimed at establishing a regulatory framework for the rapidly growing digital asset market, including cryptocurrencies and blockchain technologies.

This bill seeks to lay the foundation for a digital rupee, which would be pegged to the Pakistani rupee and regulated by the central bank. Aurangzeb indicated that an IMF mission had arrived in Pakistan to talk about the Climate Resiliency Fund. This technical mission will remain for three to four days, after which further deliberations are expected.

Additionally, another IMF delegation is anticipated to arrive in Pakistan in the first week of March for formal discussions on the six-month review of the $7 billion loan programme. According to him, these discussions will involve the Ministry of Finance, the SBP, and other ministries, leading to the global lender’s review of Pakistan’s performance during the first six months of the Extended Fund Facility.

He addressed the government’s losses of Rs1 trillion from the state-owned enterprises (SOEs), which underlined the necessity for privatisation and SOE reforms. The finance minister noted that the Cabinet Committee on SOEs was not only considering privatizing the loss-making public sector entities but also recommended the privatisation of profitable insurance companies, questioning why the insurance sector should be run in the public sector if it can succeed in the private sector.

“At this point, reforming the SOEs and moving forward toward the privatisation agenda is the right thing to do for the country,” Aurangzeb said. He emphasised the need for sustainable and inclusive growth, stating, “We must change the DNA of our economy.”

The minister stressed the importance of not continuing with the vulnerabilities of the external account. He mentioned that when the country’s GDP reaches 4 percent, it often leads to a balance of payments problem, requiring reliance on lenders of last resort.

The government aims for export-led growth beyond textiles, IT, and agriculture, he added. Looking ahead, the minister identified minerals as a potential game changer from 2028 onwards. He indicated that every sector must start exporting from Pakistan leading up to 2028.

In his opening remarks, Zafar Masud, Chairman PBA, addressed criticism regarding the banking industry’s tax contributions. He pointed out that the banking sector was the highest taxpayer in the country, having paid Rs644 billion in taxes in 2023, directly funding national infrastructure, public services, and economic programmes.

Masud emphasised that the banking sector liquidity support was vital for the government, warning of severe repercussions if banks cease their support. In his presentation, he highlighted that despite high contributions to the GDP, the SME and agriculture sectors received a very small share of private sector credit.

Only 7 percent of private sector credit goes to SMEs, and less than 5 percent of small-holder farmers have access to credit. High levels of undocumented transactions make bank lending to the SME and agriculture sectors unviable.

Furthermore, lack of formal credit histories and collateral leads banks to consider these sectors as high-risk. In addition, he mentioned that the SBP had mandated a full transition to Islamic banking by 2027, in alignment with the Federal Shariah Court ruling.

This conversion includes transitioning conventional branches, customer accounts, and financial structures to comply with the Shariah principles. While the banks are actively pursuing this conversion, government support remains crucial in creating an enabling environment through developments such as asset-light Sukuk by the government, correspondent banking arrangements, and partnerships with international development finance institutions.