Pakistani banks to develop blockchain-based KYC despite cold attitude towards crypto
The State Bank of Pakistan has been commissioned to develop a blockchain-based national eKYC (Know-Your-Customer) platform for retail banking services, according to local media.
The project is part of the central bank’s ongoing efforts to strengthen controls against money laundering and the financing of terrorism and to improve financial inclusion – both of which the country has struggled with in recent years.
It is the second blockchain initiative by the State Bank of Pakistan in less than six months.
Consonance
The project will be led by the Pakistan Banks’ Association (PBA) and use the “Consonance” eKYC platform developed by Avanza Solutions.
Consonance is a private self-regulating blockchain system that will allow banks to store and share consenting customers’ details for review and onboarding.
The PBA said the new system will result in improvements for both the banking system and the end user, especially when creating new accounts.
Has Pakistan’s Anti-Crypto Stance Changed?
Pakistan has traditionally held an anti-crypto stance and has openly banned banks from allowing customers to buy cryptocurrency directly for a number of years now. However, the country has not classified crypto as illegal so far, meaning peer-to-peer markets continue to thrive, with more than 27 million crypto holders and users as of June 2022.
Crypto supporters have urged the government to reconsider the ban and bring crypto into the tax net. But with the country’s political and economic struggles, any breakthrough in crypto legislation is unlikely in the near future.
The country’s stance has softened in recent months, and it has started to look seriously at digitization in the financial industry – mainly in the form of a CBDC.
The Central Bank of Pakistan announced in December 2022 that it has started work on the development of a CBDC and expects to launch it by 2025 – making it one of the few countries in the world actively developing e-money and regulation around it.
The central bank intends to issue licenses to non-banking entities called “Electronic Money Issuers” (EMIs), which will issue and manage CBDC on its behalf.
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