Pakistan State Bank Governor on Fintech, Digital Currency and Stripe
By Riaz Haq
CA

State Bank of Pakistan is studying the issuance of central bank digital currency (CBDC), according to the country's central bank chief Dr Reza Baqir. Recognizing Pakistan's growth potential, the San Francisco-based Stripe, valued at $95 billion, has recently invested in Safepay, a fintech startup in Karachi, Pakistan. Dr Baqir spoke of both of these developments in an interview with CNN's Julia Chatterly.

Central Bank Digital Currency (CBDC)
China's central bank is testing its digital currency in several major Chinese cities. The chairman of the US Federal Reserve has recently confirmed that the US Central Bank is working on the digital dollar. The State Bank of Pakistan announced in 2019 that it was developing a digital currency.
It seems that the popularity of Bitcoin has triggered serious worries of loss of control of the official financial systems among the central bankers around the world. China's substantial lead in digital currency could put it far ahead of the US in the future of global payments and financial settlement. It could eventually displace the US dollar and provide China with the immense global financial power that the US currently enjoys.
Dr Reza Baqir recently confirmed to CNN what a top official of the State Bank of Pakistan, the nation's central bank, announced in April 2019: the institution aims to issue a digital currency (Central Bank Digital Currency or CBDC) by 2025. Speaking at the launch of regulations of Electronic Money Institutions (EMIs), central bank officials said in 2019 that EMIs will be non-bank entities to be licensed by the central bank to issue e-money for the purpose of digital payments. Pakistan's then finance minister Asad Umar and central bankers said they were targeting Pakistan's economy to go fully digital by 2030.
More recently, the State Bank of Pakistan launched Raast, a digital payment system. It is essentially a pipe that is intended to connect government and financial institutions with consumers and merchants with each other to process payments instantly at very low cost. Raast will be boosted by Pakistan government's decision to use it to pay salaries and pensions as well as welfare funds to recipients of Benazir Income Support and Ehsaas Emergency Cash programs.

Stripe's Entry in Pakistan
Stripe, a San Francisco fintech firm valued $95 billion, announced last month that it is entering the Pakistan market with an investment in Karachi-based Pakistani startup Safepay. Founders Ziyad Parekh and Raza Naqvi told Rest of World that they were taken aback by the interest from fellow Y Combinator alumni Stripe. “We were not expecting it and were really intrigued, as they have been a huge inspiration for us,” said Naqvi. “They (Stripe’s founders) understand that partnering up with people who are ambitious and want to tackle a problem is a much better way to enter a market than kind of going in there without any context,” he added. “At a founder-to-founder level, we spoke, and they understood what our vision was.”
The State Bank of Pakistan recently launched Raast, a digital payment infrastructure that represents a great leap forward for the use of financial technology (FinTech) and financial inclusion in the country. It will also promote e-commerce in Pakistan. Undocumented economy poses a serious threat to the country because it creates opportunities for criminal activities and tax evasion. Raast is part of the government's effort to modernize payment systems and document the nation's cash-based informal economy.

Pakistan's Potential
Pakistan has the world's 5th largest population with young people offering tremendous growth opportunity. Broadband subscriptions in the country have soared from 2 million in 2012 to 100 million today, according to the nation's telecommunications regulator. Ookla, recognized globally for its broadband speed testing, reports that Pakistan's average broadband download speed is 11.35 Mbps, while its upload speed stands at 10.7 Mbps. Thousands of kilometers of new fiber optic cable are being installed. Mobile data usage in Pakistan has recently surged to 8,000 petabytes. Smartphone sales are also on the rise. All indicators are pointing to Digital Pakistan becoming a reality in the near future.
Pakistan's economy is overwhelmingly cash-based. More than half of the population is unbanked. It offers a great untapped market for financial technology firms. Pakistan is also promoting digital payments to enhance financial inclusion and document the economy. Eliminating interbank digital transaction fees during the covid pandemic has resulted in 100%-200% jump in such transactions.
Summary:
Speaking with CNN"s Julia Chatterly, the State Bank of Pakistan Governor Reza Baqar said the Pakistani government is currently studying the idea of issuing central bank digital currency (CBDC). China is showing Pakistan the way with its CBDC. There will be an announcement on the country's CBDC in the next several months. Because CBDC is issued by the central bank, it can help the country fight crime and corruption. Pakistan is also promoting digital payments to enhance financial inclusion and document the economy. Eliminating digital payment fees during the covid pandemic has resulted in 100%-200% jump in such transactions. He said fintech companies and digital payment processors like Stripe are welcome to operate in Pakistan. It has the world's 5th largest population with young demographics offering tremendous growth opportunity.
Here's a brief video of Dr Reza Baqir's CNN interview with Julia Chatterly:
https://youtu.be/BZ8MAi-_Qb4