Pakistan adopts blockchain technology to attract remittances
KARACHI : Pakistan has deployed for the first time the blockchain technology in the banking sector to attract worker remittances from Malaysia, which is a step in the direction defined by the Financial Action Task Force (FATF) to combat terror financing and money laundering.
The technology will not only make financial transactions instant and secure, but will also document each and every step taken by the sender and receiver of remittances. This will help fight the illegal Hawala and Hundi system at the international level.
“The deployment of the blockchain technology, however, does not mean Pakistan has allowed international financial transactions in bitcoin and cryptocurrencies, which remain banned in the country,” State Bank of Pakistan (SBP) spokesman Abid Qamar told The Express Tribune. “The central bank has allowed the use of the technology which has thousands of uses.”
Telenor Microfinance Bank said in a statement on Tuesday “Telenor Microfinance Bank, in partnership with Valyou of Malaysia, has introduced Pakistan’s first blockchain-based cross-border remittance service, powered by the industry-leading blockchain technology developed by Alipay – the online payment platform operated by Ant Financial Services Group.”
Earlier, China’s Alipay had acquired a 45% stake in the microfinance bank for $184.5 million. The microfinance bank got approval from the central bank for use of the technology about a couple of months ago.
Standard Chartered Bank is the settlement bank in the whole process of attracting remittances through the blockchain technology, the official said. The plan was unveiled at an event in Islamabad attended by SBP Governor Tariq Bajwa, marking a major milestone in the country’s journey towards financial inclusion, the statement added.
Bajwa said international remittances, which stood at around $20 billion per year, were important from the perspective of overall macroeconomic stability and their positive spillover into improving lives of millions of families.
“Home remittances contributed over 6% to GDP, equivalent to over 50% of our trade deficit, 85% of exports and over one-third of imports in FY18,” he said.
The central bank governor said the government and the SBP had taken a number of initiatives to promote the transfer of home remittances using formal financial channels and the new blockchain technology-based remittance service would complement these efforts as the transfer of cross-border remittances in real time would bring convenience and facilitation for both the senders and the beneficiaries.
“This puts Pakistan on the map of very few countries in the world that have launched international remittance service using the blockchain technology,” he added.
SI Global Solutions CEO Noman Said, who was part of the Islamabad Safe City project, termed the deployment of the technology a move in the right direction.
“This is a much bigger step than just digitalising financial transactions…this is all about a dedicated computing power between encrypt (send) and decrypt (receive),” he said.
This is the beginning. Later, Pakistan may receive remittances from other countries using the blockchain technology.
The statement added that the service would enable Pakistanis living in Malaysia to send money home instantly and securely through Telenor’s remittance service provider – Valyou.
The blockchain technology will significantly boost the speed and efficiency of remittances from Malaysia to Pakistan. It will also ensure that money transfers are secure and transparent, as all information stored, shared or uploaded through the blockchain remittance platform will be encrypted with advanced protocols in order to protect users’ privacy, it said.
The service will make round-the-clock, real-time money transfers between the two countries possible at a competitive exchange rate, “with Alipay’s transaction fee waived during the one-year trial period,” it added.
“The new remittance service is one of the examples of how emerging technologies can assist countries meet their digital and financial inclusion goals. We’re thrilled to be part of Pakistan’s financial inclusion efforts and we’re dedicated to exploring breakthroughs and applying them to benefit more people in more places,” said Ant Financial Chairman and CEO Eric Jing.
FAQs
Blockchain-based remittance platforms offer faster, cheaper and more transparent transactions compared to traditional methods. Startups like Abra and MoneyGram are already using blockchain to make efficient cross-border payments, potentially saving Pakistani families from dollars in fees.
What is the use of blockchain technology in Pakistan? ›
For Pakistan, the adoption of blockchain could mark a significant step towards addressing challenges in effective case management, property disputes and ensuring secure land title registration. Efficiency in case management is a key area where blockchain can make a difference.
How does blockchain help remittance? ›
The integration of blockchain into remittances addresses several key issues, including high transaction costs, security concerns, and slow transfer times. By harnessing the power of this technology, remittance processes are not only becoming more streamlined but also more accessible to the general population.
Is blockchain legal in Pakistan? ›
Cryptocurrencies like Bitcoin are not officially regulated in Pakistan, however, it is not illegal. As of 16 January 2021, the State Bank of Pakistan has not authorized any individuals or organizations to carry out the sale, purchase, exchange, and investment of virtual currencies, coins, and tokens.
Do Pakistan banks agree on blockchain based KYC system development? ›
In March we reported that the Pakistan Banks' Association signed a contract with Avanza Group to develop a blockchain-based shared Know Your Customer (KYC) solution. It was developed with guidance from the State Bank of Pakistan, which advised all banks to join yesterday.
Which country is best for blockchain technology? ›
Switzerland, Malta, Singapore, Estonia, Germany, Japan, Portugal, and the UAE are some of the best places to live and work in the blockchain era. These countries offer supportive regulations, high quality of life, and strong economies, making them attractive destinations for crypto enthusiasts.
What is the role and potential of blockchain technology in Islamic finance? ›
Blockchain is a natural technological compliment to Islamic financial arrangements in that it helps data storage and retention methods enhance trust, reduce fraud and promote honesty in the digital economy. Trust, honesty and transparency are all virtues that Islam and many other religious traditions hold sacred.
Can blockchain technology reduce the cost of remittances? ›
Yes, blockchain technology can significantly reduce remittance fees and processing times. By eliminating intermediaries and automating transaction verification processes, blockchain can make cross-border transfers faster and more cost-effective.
What are the three major benefits of blockchain? ›
What are the benefits of blockchain? Blockchain is a secure, transparent, and efficient way to share data across multiple parties. Blockchain cannot be altered or reversed, which means participants can trust the data that they are presented with.
What is the biggest advantage of blockchain when making international payments? ›
By greatly reducing paperwork and errors, blockchain significantly reduces overhead and transaction costs, and reduces or eliminates the need for third parties or middlemen to verify transactions.
This is permissible in Islam. The application of blockchain has been widely used in Islamic sectors, especially in the Halal Industry where blockchain is used to improve the traceability system in the halal labelling process that allows transparency of the journey of the product.
Is Bitcoin available in Pakistan or not? ›
There are a few crypto ATMs in Pakistan installed in major cities, such as Islamabad, Lahore, and Karachi. Bitcoin ATMs enable users to purchase and sell BTC by verifying their identity and providing a Bitcoin wallet address.
Is blockchain banned in India? ›
Is Cryptocurrency In India Legal or Not? Cryptocurrencies as a payment medium in India are not regulated by any central authority. There are no rules and regulations or any guidelines laid down for settling disputes while dealing with cryptocurrency. So, trading in cryptocurrency is done at investors' risk.
What is the use of blockchain in Pakistan? ›
The central bank governor said the government and the SBP had taken a number of initiatives to promote the transfer of home remittances using formal financial channels and the new blockchain technology-based remittance service would complement these efforts as the transfer of cross-border remittances in real time would ...
What does KYC mean in blockchain? ›
Understanding Know Your Customer Requirements for Cryptocurrency Exchanges. Like financial services, cryptocurrency exchanges have legal requirements to Know Your Customer (KYC). The goal is to better protect and maintain the assets and privacy of consumers in the onboarding processes.
What is the main use of blockchain? ›
As a result, you can use blockchain technology to create an unalterable or immutable ledger for tracking orders, payments, accounts, and other transactions. The system has built-in mechanisms that prevent unauthorized transaction entries and create consistency in the shared view of these transactions.
Is crypto banned in Pakistan today? ›
Abstract. Cryptocurrencies have been gaining popularity in Pakistan since 2015. However, in 2018, digital currencies were banned in Pakistan by the State Bank of Pakistan and the Federal Board of Revenue.
What is a blockchain based solution to control power losses in Pakistan? ›
Based on the blockchain technology, this paper proposes a power loss preventing solution by using Ethereum smart contracts. These contracts handle both sides of the power economy (the consumer and the grid) by ensuring the integrity and security of data.
Why blockchain technology is needed? ›
Blockchain helps in the verification and traceability of multistep transactions needing verification and traceability. It can provide secure transactions, reduce compliance costs, and speed up data transfer processing. Blockchain technology can help contract management and audit the origin of a product.
