Transforming the Financial Sector through Digital Currency Ecosystem

 
 
 
Posted by: IIPS Category: Daily Insights Tags: , , Comments: 0

Financial stability in a country creates employment, improves productivity and enhances people’s confidence to invest and save money. Strong banking systems and efficient capital markets flow funds toward most productive uses and help the government raise investment capital, maintain financial safety nets, and speed payments securely across borders. The government is trying to promote economic growth via the financial sector by introducing digital banking. E-banking gained momentum in 2020, increasing bank transactions from Rs 224.3 million to Rs253.7 million (Dawn,2022).

Digital currency, commonly known as cryptocurrency, works as a medium of exchange through a computer network. It is not upheld or maintained by any government or central bank. Using digital currency, one can purchase or sell anything using mobile devices. Such digital technology is transforming the financial sector due to faster payments, smooth international transactions, efficiency, lesser corruption, and maximum financial inclusion. This virtual currency will also expand banking networks and help nations fight money laundering.

However, Pakistan also aims to introduce its digital currency, like bitcoin cryptocurrency, to facilitate the financial sector and make it easier to combat money laundering and terror financing. The electronic currency will benefit the country to boost its efforts for financial inclusion and eradicate corruption from the government. The digital currency will increase coordination between monetary and fiscal policies and help the country attract fresh foreign investment. It will provide a documented form of every financial transaction allowing authorities to track who pays money to whom and for what purpose.

 

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IMARAT Institute of Policy Studies

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