Pakistan Banks to Launch Blockchain-Based Platform for KYC Procedures
The Pakistan Banks’ Association (PBA), an organisation comprising 31 traditional banks operating in Pakistan, is set to launch a national electronic platform for know-your-customer (KYC) procedures. This blockchain-based system aims to enable banks to exchange customers’ personal information by using a decentralised and self-regulated network, strengthening their anti-money laundering (AML) capabilities to counter terrorism financing (CTF).
On 2 March 2023, PBA signed a contract with Avanza Group to develop Pakistan’s first blockchain-based KYC platform, which will be named Consonance. By seeking a customer’s consent, any details collected by one bank can be shared with another via a shared blockchain. This initiative is expected to unite companies specialising in various banking applications, blockchain, artificial intelligence and customer experience management solutions to improve operational efficiencies, primarily enhancing customer experience during onboarding.
The signing formality of the blockchain-based platform was held at the industry organisation’s office in Karachi in the presence of various officials, including Waqas Mirza, CEO of Avanza Innovations, and Chairman Muhammad Aurangzeb. Other banks in the PBA group include Citibank, Industrial and Commercial Bank of China and Deutsche Bank. According to PBA, this platform aims to improve the customer experience while opening an account and minimise onboarding costs to facilitate financial inclusion.
Blockchain for KYC Checks
Pakistani banks plan to modernise their systems by integrating the latest technologies into their daily operations. Consonance, a KYC blockchain-based e-platform designed by Avanza Group, will standardise and exchange customer data via a decentralised and self-regulated network.
This e-platform will bring advanced banking software, blockchain technology, artificial intelligence and customer experience management systems experts together to develop an efficient and transparent financial system in Pakistan. Banks can assess their existing and new clients by acquiring data from the KYC checks of other participating establishments. Blockchain records financial transactions automatically in an unalterable format.
Overview of Crypto Adoption in Pakistan
In March 2022 during the 13th Karachi Literary Festival, the Governor of the State Bank of Pakistan, Reza Baqir, discussed the practical applications of cryptocurrencies during a panel discussion. He acknowledged that blockchain technology has the potential to be helpful, and it can effortlessly benefit from dealing with various issues. However, he also talked about the risks associated with cryptocurrencies.
The Pakistani central bank governor pointed out that regulators or law enforcement agencies have no visibility over cryptocurrency transactions and their purposes. Many misuses such as human rights violations, money laundering and trafficking are associated with cryptocurrencies globally. These risks urged Pakistan’s Telecommunication Authority, the Federal Investigation Agency and the central bank to recommend banning cryptocurrencies and more than 1,600 crypto websites.
Alternative Ways of Saving Money for a New Business
The Pakistani government aims to authorise a central bank digital currency (CBDC) while joining other regions in the competition to launch CBDCs. SBP’s Jameel Ahmed stated that these landmark regulations are a sign of the SBP’s commitment towards openness, technology adoption and digitisation in financial institutions.
On 13 January 2022, the State Bank of Pakistan asked the Sindh High Court to ban all unauthorised operations of crypto exchanges and impose penalties on them. A complete ban on all crypto assets and related activities was suggested by the Deputy Governor of SBP Sima Kamil, according to insiders from Bitcoineer. However, the court ordered a joint report by the Ministries of Law and Finance to decide whether or not any form of cryptocurrency should be allowed in Pakistan.
The introduction of a blockchain-based KYC platform aims to improve Pakistan’s financial systems, enhance their AML capabilities and ensure transparency while maintaining privacy. The Pakistani government’s initiative to digitise their financial institutions aims to enable a more efficient and transparent banking system, making them competitive in the CBDC market.
According to PBA, this platform will improve the customer experience during onboarding and facilitate financial inclusion. With Consonance, customers can enjoy hassle-free account opening services without having to worry about the added costs.
In conclusion, Pakistan is stepping forward to meet global technological advancements by integrating blockchain in its financial systems. The PBA expects to launch the KYC platform soon, meaning Pakistan will have the advantage of being one of the few countries with such a system in place.