The Pakistani government is taking significant steps to amend the State Bank of Pakistan (SBP) Act, aiming to legalize cryptocurrencies and digital currencies.

This proposed shift would empower the SBP to effectively manage both physical and digital currencies, potentially allowing it to issue its own central bank digital currency (CBDC) if approved.

Finance Minister Muhammad Aurangzeb has emphasized the need for more flexible eligibility criteria for top SBP positions, especially with two deputy governor roles becoming vacant.

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

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

In addition, the SBP plans to create a subsidiary dedicated to developing and managing digital payment systems to enhance the national financial infrastructure.

The amendments also aim to lift the ban on dual nationals serving in senior positions at the SBP, reversing restrictions that were put in place in 2022.

Approximately a dozen amendments have been drafted by the finance ministry and are currently under review by the Ministry of Law, awaiting federal cabinet approval.

Pakistan is keen to avoid being placed on the Financial Action Task Force (FATF) 'grey list,' which includes avoiding the legalization of cryptocurrencies as a condition.

On the same day the cryptocurrency proposals were announced, the MPC also revealed a 2.5% cut in interest rates, citing a decline in food inflation and favorable oil prices.

This marks a notable change from the previous government's anti-cryptocurrency stance, which was evident in earlier statements by former finance minister Aisha Ghaus Pasha.

Since his appointment in March 2024, Aurangzeb has advocated for a more supportive approach to cryptocurrencies, influencing the Monetary Policy Committee's (MPC) current proposals.