The National Bank of Rwanda (NBR) will join the list of other countries globally that have introduced digital currencies as alternatives to physical cash.
- Rwanda plans to roll out its own Central Bank Digital Currency (CBDC) by 2026.
- About 11 Central Banks in the world have already issued digital currency options to their citizens, with Ghana, Nigeria, and South Africa being the only African countries that are on the initial stages of introducing them.
- The plans for a Digital Currency will be interlinked with Rwanda’s ambition to morph itself into an ICT hub and a cashless economy, a position that currently fits Kenya best.
“The CBDC would be a digital form of cash. In the same way Rwandans use banknotes, coins to buy things, or even electronic payments to send money, the central bank digital currency would do the same,” Rwanda Central Bank’s deputy Governor, Soraya Hakuziyaremye told The New Times.
After carrying out a feasibility study alongside banks, fintechs, and payment platforms, Rwanda discovered that the main risk inherent in the CBDC plan is lack of adoption. This would effectively make the roll out useless and pointless in its aims.
Hakuziyaremye mentioned that the process to create the Digitial Currency will be as slow as it is meticulous. Engagement with the private sector and trading partners from across the region would be necessary to entrench the currency’s validity. A public consultation will be held in the next four weeks, followed by a small-scale experiment to test the viability of the technology and its design.
“We are mindful of our region. For instance, when we look at countries that have undertaken research or piloting, currently we have close to 86 countries that have formally started piloting or are at the same level with us in research,” she said.
Why are Digital Currencies Still Unpopular?
Countries in the European Union and China are also planning to roll out digital currencies next year. But countries like Kenya, known for a relatively strong cashless economy, are not very enthusiastic about the idea. In June last year, Central Bank of Kenya said that issuing a Digital Currency was not part of their priorities but they were ready to receive insights.
“On the global stage, the allure of CBDCs is fading. Implementation of a CBDC in Kenya may not be a compelling priority in the short to medium term,” said CBK in a statement last year.
Central Bank Digital Currencies are still challenged by the popularity of deregulated cryptocurrencies. This is because Central Banks still prefer to roll them out through local banks and directly control its supply. This means that governments can trace transactions and track them – an activity that violates the basic principles of financial security that digital currencies sought to entrench.
In a country like Nigeria where Cryptocurrency is popular despite governmental efforts to crack down on P2P platforms, the eNaira was largely ignored.
Central Bank Digital Currencies promise their adopters top notch protection, but what this translates to the ears of investors is that the government can effectively decide to violate your financial secrecy. Centralization is seldom a feature that can be alignable with digital currencies.
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