In a risky pivot toward digital finance, Pakistan is partnering with American crypto venture World Liberty Financial to roll out a dollar-tied stablecoin. According to a detailed analysis, this strategy threatens to exacerbate dollar dependency, intensify rupee depreciation, and destabilize the nation’s monetary foundations.
Daily Mirror’s in-depth report dissects the mechanics: Dollar-pegged stablecoins inherently promote the greenback over local tender, nudging citizens toward digital dollar holdings. This behavioral shift risks entrenching currency substitution, where the rupee loses ground in everyday transactions.
The potential fallout is stark. Exchange rate pressures could ignite a self-reinforcing loop of rupee weakening, compounding Pakistan’s woes of rampant inflation spikes, rapid value erosion, and IMF-dictated stabilization loops that have eroded public trust in the currency.
Policymakers in a country with chronic external imbalances and constrained policy tools should think twice, the report advises. Far from stabilizing, official stablecoin endorsement might fan the flames of volatility.
A deeper concern lies in disintermediation. By routing liquidity outside banking channels into digital wallets, stablecoins undermine the transmission of monetary policy. Pakistan’s bank-centric system could see diminished effectiveness from rate changes, turning liquidity control into a nightmare.
Despite the central bank’s historical wariness of crypto, this Trump-family-affiliated partnership bestows quasi-official status on an externally managed stablecoin framework—allegedly influenced by internal political pressures.
Global watchdogs are sounding alarms. IMF warnings spotlight bank deposit drains and monetary architecture fragility in weak economies. BIS critiques highlight how these tools fall short of true currency benchmarks, imperiling sovereignty.
At their core, stablecoins are private debts hinging on opaque reserves, legal backing, and issuer resilience in turmoil. Pakistan, without oversight over foreign issuers or crisis-response mechanisms, stands particularly vulnerable.
This report serves as a clarion call: Pakistan must scrutinize the sovereignty costs of its crypto dalliance. Embracing foreign stablecoins without safeguards could mark the rupee’s tipping point toward irrelevance.