MoU with Pakistan to study stablecoin use in cross border payments flows

Key Points

• The State Bank of Pakistan (SBP) is engaged in the pilot and has provided a framework for testing both compliance and regulated payments.
• Lower cost cross-border payments & quicker settlements are the primary objectives of the use case for USD1.
• The Digital Pakistan strategy guides these objectives by ensuring that the development of the stable coin will include principles such as inclusion, security, and integration to global digital finance networks.
• An MOU between Pakistan and World Liberty Financial will set forth the scope of the investigation for the exploration of safe digital payment options.

Industry stakeholders will be expected to provide feedback through a series of sandbox trials prior to any national rollout of the technology.

I believe that there is a logical and methodical process that can be followed, which would allow for testing of the technology to occur while meeting all regulatory requirements and providing transparency to users. Pakistan seeks to ensure that its experiments with stablecoins are conducted using real-time payment rail systems and associated risk control measures. World Liberty Financial intends to propose the USD1 for transfers, wallets, and merchant flow, subject to being part of a compliant program.

The involvement of the State Bank of Pakistan indicates that there will be close oversight of the required reserves, audits, and the screening of transactions. Cross-border payments will continue to be the first area of focus for the use case for USD1 due to the reliance of many families who send remittances abroad, including migrant workers, to have access to a reliable means of settlement.

CEO Zachary Witkoff stated, “users deserve safe, transparent digital finance with strong checks” when referring to his approach to prudently issue, redeem, and disclose the creation of reserves and redemption flows under local currency regulations.
Regulators intend to enable interoperability with licensed payment firms, banks, and wallet providers.

Regulators will monitor the flow of funds, identify and investigate suspicious activity, and require robust identity verification standards for users.

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Sandbox First, Then Scale Carefully

The teams developing the stable coin technology anticipate establishing a sandbox environment to conduct limited-scale testing of the technology with volume caps, rigid onboarding, and continuous supervisory oversight.

Metrics collected during the pilot will inform SBP’s policies on custody, reserves, and redemption flows under local currency regulations. Fraud rates, time-to-settlement, and average transfer cost are just a few of the key performance indicators to be evaluated during the pilot. Positive results from the pilot will likely lead to a gradual expansion across corridors with high remittance demand.

Digital Pakistan provides a framework of goals, targets, and accountability for this project. Pakistan’s Digital Pakistan vision includes financial inclusion, rapid disbursement of government funds, and transparent record-keeping. World Liberty Financial will provide the tools necessary to monitor and analyze user behavior and provide tools for compliance reporting.

Stablecoins must be integrated into existing clearing systems, tax reporting systems, and consumer protection systems.

MOU With Pakistan To Study Stable Coin Becomes A Live Policy Workshop

Experts and officials will create maps of risk with respect to custody, reserves, and market stress. Models of redemptions of USD1 during periods of extreme volatility across global markets will be tested. Independent attestations and frequent disclosure are planned along with diversified reserve management. Transparency is crucial to educating users as to the backing, liquidity ladder, and redemption pathway of the stablecoin.

Cross-border payments are plagued by delayed settlement, unclear fees, and uncoordinated reconciliation efforts. Stablecoins offer instantaneous settlement, a reduced number of intermediaries, and auditable records.

Legacy corridors will be compared to corridors using USD1 for comparison of speed and cost. Merchants and platforms will test the use of stablecoins for payouts related to exports, digital work, and subscription-based services.

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Governance, Licensing And Public Communication Are Important To Building Trust

The State Bank of Pakistan will develop guidelines for licensing, reporting frequencies, and responses to incidents. Dashboards for the public will display volumes, average fees, fraud rates, and service availability. Grievance mechanisms will be developed to address concerns quickly and to provide refunds and dispute resolution procedures.

Education programs will provide information about the safety of wallets, how to recover lost accounts, and prevent phishing attacks for new users. World Liberty Financial previously collaborated with the Pakistan Crypto Council for research. The new MOU extends this collaboration to explore tokenization pilots and the application of blockchain finance.

The authorities will study the relationship between stablecoins and asset markets, subject to strict limitations. A clear separation between payment tokens and higher-risk products is necessary to protect households and small businesses.

MOU With Pakistan To Study Stable Coin Keeps Inclusion At The Center

The program will invite banks, fintech companies, and licensed money transfer operators to participate. Rural users require mobile applications that are easy to use, do not require excessive bandwidth, and are available in their native languages. Direct transfers into secure, low-fee wallets benefit women-led households. Exporters desire to settle more rapidly, experience fewer chargebacks, and easily reconcile invoices with transfers.

In my opinion, the success of this effort will rely heavily on conducting measured pilots with open and transparent results and public oversight. Each phase must publish lessons learned, modify rules, and enhance tools to promote safety.
If the metric demonstrates a positive impact on users’ lives, they will adopt the technology across priority corridors and services. If risk increases, regulators will have the tools to pause, modify, or terminate the pilot.