Tag’s in-principle and pilot operations approval to function as an electronic money institution was canceled by the Central Bank of Pakistan on Friday, posing an existential danger to the company.
The State Bank of Pakistan announced in an order that it is revoking Tag’s authorization to operate as an electronic money institution, which is required for entities to offer innovative, user-friendly, and cost-effective low-value digital payment instruments such as wallets, cards, and contactless payments. The central bank has also directed the firm to immediately deactivate all consumer wallet accounts and remove its apps from app stores.
Tag violated regulatory rules, as well as “other problems” that arose during the firm’s pilot activities, according to the central bank. The decision was made to “defend the general public’s interest,” according to the statement.
The regulatory decision comes after a months-long investigation into Tag. Which provides banking and financial services to consumers in Pakistan such as contactless payments, cards, and wallets.
According to an earlier investor letter, the business has been accused of falsifying paperwork to the central bank. In August, the central bank directed Tag to “immediately” repay all consumer payments.
Tag is one of Pakistan’s most valuable startups. In its seed fundraising round last September, it was valued at $100 million. Liberty City Ventures, Canaan Partners, Y Combinator, Addition, and Mantis are among the startup’s investors.
The State Bank of Pakistan did not immediately reply to phone and email requests for comment.
Friday’s action is yet another setback for Pakistan’s small but rapidly developing startup scene, which saw record funding last year. Airlift, formerly the most valuable company in the South Asian market, filed for bankruptcy in July of this year. After failing to get new investments.
Tag’s CEO could not be reached for comment immediately. The startup intends to challenge the State Bank’s decision, according to a source.