As the world embraces technology, the financial systems are changing rapidly-and one of the most prominent developments is the emergence of stablecoins. Stablecoin is backed by a stable asset which is most often pegged to the US dollar, the euro, or even the gold ensuring that it does not fluctuate. This stability helps it to withstand market fluctuations better than other coins. Such stability is crucial for developing countries like Pakistan, especially in fuelling cross-border transactions, and remittances, and protecting their savings against high inflation rates.
Interest in digital currencies has grown in Pakistan in recent years, particularly among young and tech-savvy people. Over 64% of the population is under 30 and the use of mobile internet continues to grow steadily. People’s interest is increasing in other financial instruments. Against the backdrop of the depreciation of the rupee, the rise of inflation and the time-consuming banking procedures, alternatives like stablecoins are becoming more attractive. Most people don’t see stable coins like USDT (Tether) or USDC (USD Coin) as speculative tokens but as practical tools for saving, transferring and managing money.
Most people don’t see stable coins like USDT (Tether) or USDC (USD Coin) as speculative tokens but as practical tools for saving, transferring and managing money.
On April 26, a delegation from World Liberty Financial landed in Islamabad to sign a letter of intent with the Pakistan Crypto Council (PCC) under Minister Bilal Bin Saqib, to draft stablecoins, tokenized assets, and sandbox regulation blueprints. Simultaneously, the finance minister allocated 2,000 MW of electricity to power crypto mining, a move to attract foreign investment. But just days later, the State Bank of Pakistan and the Ministry of Finance reiterated that cryptocurrencies including stablecoins are still illegal. Pakistan is caught in a policy tug-of-war – on one hand, Pakistan is embracing the stablecoins and blockchain while on the other, enforcing a legal ban reveals that without much noise, Pakistan is actively pursuing stablecoin-related projects.
In fact, many freelancers in Pakistan prefer using stablecoins for remittances due to their speed, low cost, and security than traditional bank transfers. For small import-export businesses, the stablecoins can be used to hedge against the fluctuating rupee and provide an alternative to foreign currency banking.
Stablecoins provide an incredible prospect of monetary incorporation. A high number of Pakistanis are unbanked, particularly, in rural areas. Under appropriate control, stablecoin platforms would potentially enable digital payments, savings and even microloans without the need to hold a conventional bank account. The current effectiveness of mobile money in Pakistan has demonstrated success stories such as Easypaisa and JazzCash and as such the country might be interested in digital finance. Stablecoins may be the next frontier in this financial evolution.
More importantly, stablecoins will help Pakistan to earn international trust. When properly regulated, stablecoin can improve remittance efficiency, increase trade with the rest of the world and make the Pakistani economy more connected to the international financial arena. Collaboration with foreign fintech companies, testing regulated remittance routes, and funding local blockchain startups may make Pakistan a regional leader in controlled digital finance.
However, uncontrolled use of such digital resources is also fraught with danger. In the absence of legal provisions, users become vulnerable to fraud, hacking as well as policy changes. The mass implementation of stablecoins outside the traditional banking system could also achieve capital flight, decrease the country’s reserves, and threaten the control of the monetary policy in Pakistan.
However, clarity is essential. Pakistan cannot afford a “start-stop” policy – supporting crypto-miners on the one hand while criminalizing them on the other hand. In a bid to instil investor confidence, attract innovation and ensure consumer protection the country needs to adopt a coherent and clear regulatory framework.
Stablecoins is a tool with both potential and risk. Though the present legal uncertainty is troubling, the proactive experimentation being conducted by the government is a good sign that wholesale change might be occurring. Through careful governance, safe infrastructure, and international cooperation, stablecoins may contribute to a better, more stable, transparent, and open financial future for Pakistani society and turn tentative experiments into self-confident visions.
The writer is a freelance columnist interested in cryptocurrency.