The risks posed by cryptocurrencies outweigh the benefits, according to Pakistan’s central bank, reiterating its earlier message to avoid investing in digital currencies.
According to Reza Baqir, governor of the State Bank of Pakistan, there is a risk of unregulated currencies being used for transactions instead of the country’s legal currency in emerging markets and developing countries struggling with large informal economies. Their speculative nature, sharp price fluctuations, and decentralized nature can jeopardies a developing country’s financial and monetary stability, he said in a speech on Feb. 14.
“Because of their anonymity, some cryptocurrencies are prone to being used for illegal economic activities,” Baqir explained. “In such cases, countries like Pakistan face the risk of a growing grey economy and capital flight.”
The country’s central bank’s four-year-old stance against cryptocurrencies is currently being challenged in a local court. Baqir, on the other hand, is still open to the idea of central bank digital currencies.
“The work on CBDCs that is being done in many countries and many international institutions is very welcome,” said Baqir. “This work, in our opinion, should be evaluated in terms of how CBDCs can contribute to each regulator’s goals.”
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.