(Bloomberg) -- Pakistan’s central bank said that risks posed by cryptocurrencies outweigh its benefits, doubling down on its earlier message to stay away from investments in digital currencies.
In emerging markets and developing countries struggling with large informal economies, there is a risk of unregulated currencies being used for transactions instead of the nation’s legal currency, Reza Baqir, governor of State Bank of Pakistan, said. Their speculative nature, acute price fluctuations, and decentralized nature can pose a risk to financial and monetary stability for a developing country, he said in a speech on Feb. 14.
“Because of their anonymous nature, some cryptocurrencies are prone to be used for illegal economic activities,” said Baqir. “In such cases for countries like Pakistan, there is a risk of a widening grey economy and a risk of capital flight.”
The nation’s central bank’s four-year-old stance of discouraging cryptocurrencies is currently being challenged in a local court. However, Baqir is still open to the idea of central bank digital currencies.
“The work underway in many countries in many international institutions on CBDCs, is welcome,” said Baqir. “This work in our view should be evaluated from the perspective of how CBDCs can contribute to each regulator’s goals.”
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