New Delhi: Pakistan’s plan to launch a dollar-linked stablecoin in partnership with US-based crypto firm World Liberty Financial could accelerate dollarisation and further weaken the Pakistani rupee (PKR), according to a report published by the Daily Mirror.

The report warns that a stablecoin pegged to the US dollar encourages households and businesses to hold it as a state-tolerated alternative to the rupee, undermining confidence in PKR and intensifying exchange-rate pressures. This “currency substitution” could create a feedback loop, accelerating the rupee’s depreciation and destabilising the economy.

Stablecoins also bypass traditional banks, diverting liquidity into digital wallets outside the regulated financial system. In Pakistan, where monetary policy relies heavily on bank balance sheets, this could blunt interest-rate transmission and complicate liquidity management.

The report notes that confidence in the rupee is already fragile due to recurrent inflation spikes, sharp devaluations, and International Monetary Fund (IMF)-mandated stabilisation cycles. The IMF and Bank for International Settlements (BIS) have cautioned that widespread stablecoin adoption could drain bank deposits, undermine monetary frameworks, and threaten monetary sovereignty in vulnerable economies.

Despite the State Bank of Pakistan historically taking a cautious stance on cryptocurrencies, the new partnership with the US firm, linked to former President Donald Trump’s family, gives quasi-official legitimacy to a foreign-controlled stablecoin, raising further risks.

The report highlights that crypto coins are private liabilities, with stability dependent on reserves, legal enforceability, and issuer credibility. Unlike advanced economies, Pakistan lacks control over the issuer and the capacity to mitigate crises arising from a foreign-controlled stablecoin.

IANS