Governor State Bank of Pakistan in his speech said that the risks of investing in cryptocurrencies outweigh the benefits. He warned citizens to stay away from investing in digital currencies.
The Governor SBP, Reza Baqir, made a speech at the Annual Investment Forum in Riyadh, Saudi Arabia, and explained his view on cryptocurrencies. The speech was issued by the bank on Monday which is now being discussed on multiple national and international platforms.
He said, ‘We have come up with the view that such virtual currencies currently have more risks than benefits when evaluated against the core objectives of us as a central bank.’ He did not go against the idea of digital currency as a whole. He said that these currencies can empower people and let them have control of their finances by democratizing finance. He said that it has a good goal overall.
Talking about the risks associated with these currencies, he explained, ‘because of their anonymous nature, some cryptocurrencies are more prone to be used for illegal economic activities. In such cases for countries like Pakistan, there is a risk of a widening grey economy and a risk of capital flight.’
The governor of the central bank of Pakistan is not presenting his concerns about cryptocurrencies for the first time. In the previous month, he suggested a ban on cryptocurrencies. The idea was encouraged by some local banks. Even, Alfalah Bank, which is one of the largest private banks in Pakistan, released a statement discouraging their customers from using their bank for cryptocurrencies.
Talking about Distributed Ledger Technology (DLT), Baqir explained that its key element is to dis-intermediate financial services and allow people to make payments without needing any central ledger or financial institution. He added to it, ‘however, we are still seeing many variants of DLT, including permissioned and permission-less ledgers.’ He further said, ‘according to some estimates, there are over 17,000 different cryptocurrencies which have gained some influence and whose total value exceeded 2 trillion dollars before the recent crash.’
However, the Governor seemed hopeful about the advancement happening through the technology called Decentralized Finance or DeFi that is supposed to provide financial services without intermediaries. He said that such innovations can make access to the capital and its movement easier through the technologies like crowdfunding and peer-to-peer landing. He showed his hope that such technologies will also make international transfers less costly and easy.