Pakistani banks want to use blockchain for KYC procedures

The Pakistan Banks’ Association has signed a contract for the implementation of a blockchain-based know your customer (KYC) platform.

The platform will be developed by Avanza Group, which specializes in customer experience management solutions, blockchain applications, advanced banking applications and artificial intelligence. This new effort to create the electronic KYC system is part of the State Bank of Pakistan’s plans to improve the country’s anti-money laundering (AML) and counter-terrorist financing (CTF) control infrastructure.

The contract signing ceremony was held in Karachi and was attended by the Pakistan Banks’ Association Chairman as well as the CEO of Avanza Innovations. PBA consists of a group of 31 traditional banks operating in Pakistan. The e-KYC platform is called Consonance, and it leverages blockchain technology to allow banks to standardize and exchange personal details through a decentralized and self-regulated network. According to the Pakistan Banks’ Association, this personal data exchange will take place with the customers’ consent.

Essentially, the platform will allow banks to make assessments of their new and existing customers using data from KYC checks carried out by other institutions. The move aims to minimize onboarding costs while facilitating financial inclusion by making it easier for customers to open accounts.

PBA officials quoted by coinspectator.com emphasized the platform’s potential to strengthen AML controls and improve customer experience by improving the efficiency of participating banks.

Pakistan wants to launch a CBDC by 2025

According to coingeek.com, Pakistan is in the race to develop a digital central bank currency and has brought forward new laws aimed at ensuring a CDBC launch by 2025. In December 2022, the State Bank of Pakistan (SBP), the country’s central bank, announced the drafting of new Electronic Money Institution (EMI) regulations to aid its efforts to launch a CBDC. These EMIs are non-banking entities with the power to issue digital currency for digital payments in support of the central bank.

Apart from providing a three-year window for the launch of the central bank’s digital currency, the rules also take into account the misuse of digital assets in money laundering, terrorist financing and drug trafficking. The new rules also include proper Know Your Customer (KYC) requirements and consumer protection guidelines.

The aim for Pakistani authorities is to close the gap between Pakistan and other Asian ones such as Indonesia, Singapore, Thailand and Hong Kong which are already making progress in their CBDC efforts.