Pakistan Banks Turn to Blockchain Technology to Update Customers' KYC Details Amid Economic Turmoil

Pakistan's banks have decided to develop a know-your-customer (KYC) platform based on blockchain technology in order to strengthen the country's efforts to curb money-laundering. Blockchain firm Avanza Group has been onboarded to create this platform, according to details shared by the Pakistan Banks' Association (PBA) which has signed an agreement with the Avanza Group for the initiative. The country is currently witnessing a decline in the value of its fiat currency.

Waqas Mirza, the CEO of the PBA and Muhammad Aurangzeb, the CEO of Avanza Innovations signed the paperwork in Karachi last week. The State Bank of Pakistan (SBP) is also part of this project, as per a Bitcoin.com report.

With a KYC platform that relies on the blockchain, banks will be able to minimise onboarding costs for bank users. When financial transactions are recorded on blockchain, they are stored in an un-alterable format, permanently. This could also increase the transparency in Pakistan's existing financial systems.

The country is also strengthening its efforts towards counter-terrorist financing and curbing money laundering.

Currently, Pakistan is undergoing a financial crisis. Internally, different parts of the country recently faced a spate of terror attacks. Amid the ongoing recession, the fiat currency of Pakistan sunk to a historic low of PKR 285 (roughly Rs. XXX) against the US dollar last week.

The country has hence, been shifting focus on incorporating blockchain and crypto as part of its financial system.

Pakistan has decided to select and licence electronic money institutions to issue e-money to facilitate digital payments.

In December last year, Asad Umar, the Finance Minister of Pakistan had noted that dabbling in the growing blockchain sector will empower the country's trade and commerce industries, while bringing its fintech sector in competition with other nations.

In January 2022, Pakistan established three sub-committees to examine the crypto sector from all angles before the nation finalises its stance on crypto legalisation.

Amid legal uncertainties, India and Pakistan, that were the second and third highest adopters of cryptocurrency globally, respectively have fallen to fourth and sixth ranks last year, respectively, according to a Chainalysis report.