Pakistan’s telecom sector has been a cornerstone of digital expansion. Mobile connectivity widened access, reduced transaction costs, and enabled the rise of branchless banking and mobile wallets. As digital services deepen and financial activity migrates to mobile platforms, however, a structural weakness has become increasingly visible: Pakistan continues to treat telecom connectivity as a substitute for digital identity. This conflation was never intentional, but it has become a growing constraint on trust, scale, and long-term digital growth.

Across banking, payments, and mobile wallets, SIM cards have gradually assumed an unintended role as identity proxies, used for authentication, account recovery, and access control. SIMs were designed to connect devices to networks, not individuals to systems of value. Expecting them to perform both roles is no longer viable in a mature digital economy. The challenge Pakistan faces is not unique, but most advanced digital economies have already resolved it through deliberate structural separation.

In the European Union, financial access is anchored in state-grade digital identity frameworks under the electronic Identification, Authentication and Trust Services Regulation (eIDAS), reinforced through device-based authentication, while SMS-based verification has been explicitly downgraded due to its vulnerability. Singapore relies on its national digital identity system, SingPass, as the primary trust anchor for financial and government services, using telecom data only as a contextual risk signal.

The United Kingdom and Australia have followed similar paths, moving away from SIM-centric security models and treating SIM-swap events as indicators of potential fraud rather than legitimate authentication. Across these systems, a consistent principle applies: SIMs enable access, while digital identity secures value. Pakistan has yet to formalize this separation, and the regulatory and economic cost of delay continues to rise.

SIM cards are transferable, replaceable, and commercially issued, with lifecycles optimized for speed and availability rather than assurance. These characteristics make them effective tools for connectivity but unsuitable foundations for identity. When possession of a SIM is treated as proof of identity, digital platforms inherit structural fragility by design.

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The resulting failures—account takeovers, recovery abuse, and agent-level manipulation—are often framed as enforcement gaps, when they in fact reflect a deeper design flaw: reliance on the wrong trust anchor. No degree of supervision can compensate for an identity model that was never designed to secure financial value.

Pakistan’s push toward digitalization and mobile wallets has been a success story. Millions now rely on mobile platforms for payments, savings, and everyday transactions. Yet this success has also exposed the limits of SIM-based trust. As transaction volumes rise and wallets begin to store real value, identity assurance becomes the binding constraint.

Without a financial-grade digital identity, mobile wallets face higher fraud losses, increased customer churn, regulatory hesitation to expand use cases, and growing international credibility concerns. In contrast, countries that anchored wallet ecosystems to national digital identity systems were able to scale safely, introduce new services, and attract long-term investment.

In modern digital states, identity is treated as public infrastructure rather than a feature embedded in private platforms. A mature framework separates three functions with precision: digital identity anchored in a state-grade system, connectivity delivered by telecom networks, and risk signaling, where telecom events inform safeguards without conferring authority. For Pakistan, this requires a coordinated national approach.

NADRA becomes the root provider of digital identity—biometric, verifiable, and reusable across public and private services—while telecom operators, under PTA oversight, remain providers of access and identity-related risk signals rather than guarantors of identity itself. Banks, mobile wallets, and digital platforms then bind accounts to digital identity and secure devices instead of phone numbers, with regulators and enforcement agencies overseeing compliance through clear legal frameworks without expanding surveillance.

Any such transition must be phased and inclusive, recognizing differences in digital literacy, device access, and regional connectivity so that citizens are migrated gradually rather than excluded abruptly. This is substitution, not disruption: replacing a fragile trust model with a durable one while preserving institutional boundaries and commercial roles.

For the telecom sector, separating identity from connectivity is not a threat but a strategic release. Over time, mobile networks have been pulled into identity and financial risk domains they were never designed to manage, exposing operators to reputational pressure, customer disputes, and implicit liability for downstream failures.

A clear separation restores balance. Telecom operators are relieved of unintended identity responsibility and can refocus on growth areas that modern markets reward, including data services, digital platforms, enterprise solutions, internet-of-things connectivity, cloud services, and fintech partnerships. In economies that adopted this model, reduced fraud improved customer retention while regulatory clarity enabled faster innovation. Connectivity becomes a stable foundation on which multiple digital industries can scale, without telecoms being burdened as de facto identity providers.

Equally important, the transition from SIM-based identification to national digital identity provides the enabling layer for Pakistan’s emerging cryptocurrency framework under the Virtual Assets Ordinance, 2025, and the establishment of the Pakistan Virtual Assets Regulatory Authority (PVARA). By anchoring access to verified digital identity rather than telecom credentials, regulators can expand licensed crypto activity—from custodial wallets to stablecoin-based remittances—without increasing systemic risk.

This approach shifts crypto oversight from defensive containment to structured expansion, allowing innovation to scale within clear regulatory boundaries. In practical terms, digital identity becomes the foundation that makes responsible virtual-asset growth both credible and sustainable.

The policy decision before Pakistan is not whether SIMs should disappear; they remain essential to connectivity. The question is whether the state is prepared to stop asking connectivity tools to perform the work of identity. Policymakers now face a clear choice: continue incrementally patching an outdated trust model, or align with global best practice by anchoring identity in a national digital framework while preserving the commercial neutrality of telecom networks.

The latter offers a durable foundation for secure digital growth; the former prolongs structural risk.

SIMs transformed communication in Pakistan, but expecting them to secure identity and financial value in a complex digital economy is neither fair nor sustainable. Modern governance assigns the right tools to the right functions, separating connectivity from identity to preserve trust at scale.

Pakistan still has a window to make this transition deliberately—strengthening mobile wallets, enabling secure digitalization, protecting telecom operators from unintended risk, and laying durable foundations for long-term digital growth. Connectivity built the digital economy; digital identity will determine whether it can be governed.