The Bank of Tanzania is waiting for the conclusion of its research into CBDCs before making a final decision on adoption.
Tanzania’s central bank says it's still considering the intro of a central bank digital currency(CBDC) but will be a taking “ phased, conservative and threat- grounded approach ” after identifying several challenges that could impact its implementation.
According to a Jan. 14 public notice from The Bank of Tanzania, since its 2021 announcement about a possible CBDC rollout, the East African country formed a multidisciplinary specialized platoon to explore the risks and benefits of CBDCs.
The bank revealed its platoon has conducted exploration looking into different types of CBDCs, models for allocation and operation, and whether its CBDC should be token- grounded or account- based.
“ The outcome of the exploration at this point revealed that further than 100 countries in the world are at different stages of the CBDC adoption journey with 88 at exploration, 20 proof of concept, 13 pilot and 3 at launch, ” the bank said.
The central bank noted that at least four countries — Denmark, Japan, Ecuador and Finland have publicly canceled CBDC acceptance plans, while another six have moved away from digital currencies due to structural and technological challenges in the implementation phase.
Some of these challenges were high implementation costs, the dominance of cash, hamstrung payment systems and the risk of disrupting the existing ecosystem, the bank said.
A crucial area being looked at by the platoon is also the pitfalls and controls associated with the allocation, distribution, counterfeiting and operation of currencies.
“ Analysis of these findings indicate that majority of central bankers across the world have taken a exemplary approach in the CBDC implementation roadmap, in order to avoid any implicit pitfalls that can disrupt fiscal stability of their economies, ” it added.
Related: IMF calls for tighter crypto regulation in Africa as the industry unfolds
At this stage, the bank has not given a clear timeline for when it'll make a decision on CBDCs in Tanzania, but says it'll “ continue to cover, research and unite with stakeholders, including other central banks, in the efforts to arrive at a suitable and applicable use and technology for allocation of Tanzanian shillings in digital form. ”
Following neighboring countries ’ efforts to introduce CBDCs, Bank of Tanzania Governor Florens Luoga made a Nov. 26, 2021, announcement that plans were underway in Tanzania to expand research into digital currencies and strengthen the capacity of central bank officials.
Cryptocurrencies are largely banned in Tanzania following a November 2019 directive from the Bank of Tanzania saying the digital assets weren't recognized by original law.
(STEPHEN KATTE, Cointelegraph, 2023)