Pakistani banks to develop blockchain-based KYC despite cold attitude toward crypto

The State Bank of Pakistan has commissioned the development of a blockchain-based national eKYC (Know-Your-Customer) platform for retail banking, according to local media reports.

The project is part of the central bank’s ongoing efforts to strengthen anti-money laundering and terrorism financing controls and improve financial inclusion — both of which the country has struggled with in recent years.

It is the second blockchain initiative by the State Bank of Pakistan in less than six months.

Consonance

The project will be spearheaded by the Pakistan Banks’ Association (PBA) and use the “Consonance” eKYC platform developed by Avanza Solutions.

Consonance is a private self-regulating blockchain system that will allow banks to store and share consenting customers’ details to assess and onboard.

The PBA said that the new system will result in improvements for both the banking system and the end user, especially when creating new accounts.

Is Pakistan’s anti-crypto stance shifting?

Pakistan has traditionally held an anti-crypto stance and has openly prohibited banks from allowing customers to purchase cryptocurrencies directly for a number of years now. However, the country has not classified crypto as illegal so far, meaning peer-to-peer markets continue to thrive, with more than 27 million crypto holders and users as of June 2022.

Crypto supporters have been calling on the government to reconsider its prohibition and bring crypto into the tax net. However, with the country’s political and economic struggles, any breakthrough in crypto legislation is unlikely in the near future.

The country’s stance has been softening in recent months and it has begun to take a serious look at digitization in the financial industry — mainly in the form of a CBDC.

Pakistan’s central bank announced in December 2022 that it has begun work on the development of a CBDC and expects to launch it by 2025 — making it one of the few countries in the world that are actively developing e-money and regulation around it.

The central bank intends to issue licenses to non-bank entities called “Electronic Money Issuers” (EMI), which will issue and manage the CBDC on its behalf.