The Pakistani government is moving forward with proposed amendments to the State Bank of Pakistan (SBP) Act, aiming to legalize cryptocurrencies and digital currencies.

This significant shift would empower the SBP to manage both physical and digital currencies more effectively.

If these amendments are approved, the SBP could issue its own central bank digital currency (CBDC), enhancing its control over the digital economy.

The Sindh High Court has mandated the government to create a regulatory framework for crypto assets within three months, challenging the SBP's previous stance against cryptocurrencies.

Pakistan's efforts to regulate cryptocurrencies are also motivated by the desire to avoid being placed on the Financial Action Task Force (FATF) 'grey list,' which includes strict conditions regarding cryptocurrency legalization.

The Monetary Policy Committee (MPC), under SBP governor Jameel Ahmad, has signaled a notable policy shift compared to past government positions that were largely against cryptocurrencies.

The proposed amendments would allow dual nationals to hold senior positions within the SBP, reversing a ban that had been in place since January 2022.

As part of these reforms, the SBP plans to establish a subsidiary dedicated to developing and managing digital payment systems, enhancing the country's financial infrastructure.

The amendments also include penalties for unauthorized issuance of digital currencies, giving the SBP comprehensive authority over currency management.

This initiative aligns with the government's broader economic strategy to modernize Pakistan's financial system and boost GDP growth in line with global trends in digital finance.

Finance Minister Muhammad Aurangzeb has emphasized the need for more flexible eligibility criteria for top SBP positions, especially with upcoming vacancies.

The proposed changes have been submitted to the federal cabinet for approval, with subsequent steps involving a review by Parliament.