The State Bank of Pakistan (SBP) intends to introduce Pakistan’s inaugural digital currency through a pilot launch within the next two months.
Please note that the digital currency by SBP is Central Bank Digital Currency (CBDC) and not Cryptocurrency.
The Differences Between Cryptocurrencies and Central Bank digital currencies (CBDCs)
1. Control: Cryptocurrencies are decentralized and operate on a distributed ledger technology (like blockchain) without a central authority. CBDCs, on the other hand, are centralized and controlled by a central bank.
2. Issuer: Cryptocurrencies are typically issued by private entities or communities through mining or initial coin offerings (ICOs). Central Bank Digital Currencies (CBDCs) are both issued and regulated by the central bank of a specific country.
3. Legal Status: Cryptocurrencies may have varied legal statuses across different jurisdictions, ranging from fully legal to restricted or illegal. CBDCs hold legal tender status within the jurisdiction of the issuing country.
4. Value Stability: Cryptocurrencies exhibit price volatility, with their value subject to frequent fluctuations. CBDCs, on the other hand, maintain a stable value as they are usually pegged to a fiat currency or backed by reserves.
5. Monetary Policy: Central banks use CBDCs to implement monetary policy and regulate the economy. Traditional monetary policies do not directly influence cryptocurrencies.
6. Privacy and Anonymity: Cryptocurrencies generally provide privacy and anonymity as transactions are pseudonymous. CBDCs have varied degrees of privacy, with the potential for transaction monitoring and identification requirements.
7. Accessibility: Cryptocurrencies are accessible to anyone with an internet connection. CBDCs can be accessible to the general public, but their availability may be subject to specific criteria or restrictions.
8. Purpose: Cryptocurrencies serve as digital assets or mediums of exchange, often facilitating peer-to-peer transactions or as speculative investments. CBDCs are primarily intended as a digital fiat currency to enhance financial inclusion.