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The global monetary system is entering a new phase in which digital money is no longer an experiment but an emerging infrastructure of statecraft, finance, and trade. Emerging economies are fast shaping this transition rather than merely observing from sidelines.Pakistan’s recent moves toward a dollar-backed stablecoin and the tokenisation of up to US$2 billion in sovereign assets place it at a decisive inflection point in this transformation. These decisions would determine whether Pakistan becomes a pioneer in regulated digital finance or turn out to be a cautionary case of premature technological adoption without institutional depth.The main question is not whether Pakistan can deploy blockchain technology, but whether it can build a coherent, credible, and resilient digital financial architecture that aligns with macroeconomic stability, financial integrity, and global regulatory expectations.Pakistan’s engagement with crypto has unfolded through caution, ambiguity, and incremental adjustment rather than a clearly articulated strategic vision. The State Bank of Pakistan (SBP) initially adopted a skeptical posture, highlighting risks to consumers, threats to financial stability, and the facilitation of illicit finance. In the absence of a defined legal framework, digital assets remained in a regulatory grey area—neither expressly banned nor effectively regulated.The policy shift toward engagement rather than outright restriction reflects a pragmatic recognition that digital assets are not disappearing and that informal crypto activity was already occurring within Pakistan.The gradual acceptance toward blockchain solutions for remittances, financial inclusion, and capital markets signals an attempt to harness innovation while managing risk. The challenge remains that this shift has been reactive rather than strategically planned, leaving gaps in governance, supervision, and legal clarity.The reported agreement between Pakistan and a company linked to World Liberty Financial to explore the use of its USD1 stablecoin for cross-border payments represents the most significant and controversial step in Pakistan’s crypto journey.The World Liberty Financial, launched in 2024 and linked to the Donald Trump family, is seeking to position itself within regulated payment systems through this partnership. The deal reportedly involves working with SBP to integrate USD1 into a regulated payments framework, though critical details remain undisclosed. The SC Financial Technologies, an associated entity, has not publicly clarified the governance, reserve backing, or legal standing of USD1. The fundamental issue is that USD1 currently lacks the regulatory foundation that most central banks would require for systemic integration.The New York Digital Investment Group (NYDIG) has flagged that USD1 is behind on monthly reserve reporting, with the latest publicly available report dating back to July 2025. Additionally, the forthcoming U.S. GENIUS Act, expecting full implementation by early 2027, is likely to restrict stablecoin issuance to subsidiaries of regulated banks or state-qualified entities such as certain trust companies.BitGo Technologies, the issuer behind USD1, may not fall within these categories, raising serious legal and compliance uncertainties. Pakistan’s central bank in this process must require proof of regulatory status, up-to-date reserve attestations, and clear custody arrangements before any integration. Delays in attestations and potential misalignment with future US law make USD1 a high-risk partner at this stage.The economic logic behind a dollar-backed stablecoin in Pakistan is fascinating but charged with trade-offs. Stablecoin rails could significantly reduce the cost and friction of remittances, which reached approximately US$27 billion in 2023 and are expected to reach US$41 billion in fiscal year 2026, making Pakistan the largest recipient in the Initial Coin Offering (OIC). Additionally, majority of these inflows originates from the Gulf, the United Kingdom, and North America, precisely the corridors where digital payment network could deliver efficiency gains.The cross-border fintech firms would likely enter Pakistan’s market aggressively if a regulated USD stablecoin framework emerged, competing on fees, speed, and foreign exchange distributions. The global remittance flows to low and middle income countries reached US$690 billion in 2025, greater than both foreign direct investment and official development assistance combined, highlighting the strategic importance of this market.The opportunity is clear, but so are the risks. Introduction of a widely used dollar stablecoin could deepen de-facto dollarisation within Pakistan’s economy, deteriorating monetary sovereignty. The risk of parallel currency circulation could undermine the Pakistani rupee rather than modernize payments. The key policy question is whether such a stablecoin would complement or compete with Pakistan’s existing financial system.The parallel initiative to tokenize up to US$2 billion in sovereign bonds, treasury bills, and commodity reserves through a memorandum of understanding with Binance represents a second pillar of Pakistan’s digital finance strategy.Tokenisation of real world assets aims to enhance liquidity, transparency, and international investor access. The agreement reportedly covers government-owned assets such as energy reserves, metals, and financial instruments, subject to regulatory approvals.The Federal Finance Minister, Muhammad Aurangzeb, has framed this as part of Pakistan’s reform arc and a long-term partnership. The Binance founder has described the move as a signal to the global blockchain industry. The policy logic is that tokenized securities could attract new categories of investors who prefer digital settlement, fractional ownership, and programmable compliance.The challenge is that tokenization does not eliminate underlying economic risks such as fiscal deficits, sovereign credit risk, or political instability. The digital wrapper cannot substitute for sound macroeconomic fundamentals.Experience of other jurisdictions provides important lessons for Pakistan. The European Union has introduced Markets in Crypto-Assets Regulation to establish clear licensing, consumer protection, and reserve requirements for stablecoins.The United Arab Emirates has created a structured licensing regime for virtual asset service providers, combining innovation with prudential oversight. Japan has allowed regulated stablecoin issuance only through licensed banks, trust companies, or registered money transfer agents, ensuring institutional accountability.On the contrary, Pakistan does not have a comprehensive digital assets law and instead uses limited measures like the Virtual Assets Ordinance, 2025. The Ordinance, in its present form, falls short of global best practices by failing to clearly define asset classification, investor protections, custodial standards, and inter-agency coordination. Lack of parliamentary legislation undermines its legitimacy and durability, making regulatory certainty fragile rather than robust.The core problem lies in Pakistan’s tendency to adopt instruments without building systems. The stablecoins and tokenization initiatives are being pursued as separate projects rather than as components of an integrated digital financial architecture. Payments, capital markets, and cross-border flows must be interoperable, legally aligned, and institutionally coordinated.The SBP, Securities and Exchange Commission of Pakistan, and Ministry of Finance currently operate in overlapping regulatory spaces without a single unified digital finance strategy. The absence of a national framework risks regulatory arbitrage, compliance gaps, and operational fragmentation. The digital money ecosystem should function as a single regulated stack rather than a collection of disconnected pilots.The execution gap remains the most significant obstacle to Pakistan’s digital finance ambitions. Global experience shows that most digital money strategies fail not because of technology, but because of weak implementation, institutional turf wars, and inadequate operational infrastructure. The Pakistan’s banking system remains uneven, with significant portions of the population unbanked or underbanked, particularly in rural areas.The integration of stablecoins into a fragmented financial environment could exacerbate differences rather than reduce them.Additionally, cross-border value transfer requires seamless interoperability between domestic banks, fintech firms, and international payment networks. Therefore, regulatory clarity is essential to avoid legal uncertainty that discourages institutional participation. The real test will be whether Pakistan can translate high-level agreements into functioning, secure, and compliant systems at scale.Pakistan cannot ignore FATF recommendations and its controls. The country spent years exiting the grey list, and any misstep in digital asset regulation could undo that progress. Therefore, poorly designed stablecoins can obscure beneficial ownership and enable illicit flows, while the FATF travel rule requires identifying information with every transfer, a standard, many exchanges still struggle to meet. Pakistan therefore needs strong KYC, transaction monitoring, and continuous suspicious activity reporting, supported by digital identity, blockchain analytics, and efficient law enforcement.Emerging markets are increasingly revealing the fault lines of digital money. Fragile banking systems and a heavy reliance on cash expose the vulnerabilities of private stablecoins, while standalone Central Bank Digital Currencies (CBDCs) have yet to meaningfully advance financial inclusion.Outcomes that are more resilient appear in hybrid arrangements that integrate regulated stablecoins, tokenized assets, and conventional banking—placing Pakistan’s initiative as a critical test case of state-led digital finance operating within fiscal and institutional constraints. Pakistan’s weak institutional capacity remains a concern. The future of Pakistan’s digital money experiment will be judged not by headlines, but by institutional strength, legal clarity, and real economic outcomes.Copyright Business Recorder, 2026
