cryptovibes.com
The Bank of Tanzania is now waiting for the conclusion of its research into CBDCs before making a final decision on adoption of the digital currency.
Tanzania’s central bank states that it is still considering the introduction of a central bank digital currency (CBDC) but it will take a “phased, cautious and risk-based approach” after it identified several issues that may affect its implementation.
Based on a January 14 public notice from The Bank of Tanzania, ever since its 2021 announcement about a possible CBDC rollout, the East African nation formed a multidisciplinary technical team to explore the risks and benefits of central bank digital currencies.
The bank announced that its team has done lots of research looking into various kinds of CBDCs, models for issuance and management, and whether its CBDC needs to be token-based or account-based. The bank stated:
“The outcome of the research at this point revealed that more than 100 countries in the world are at different stages of the CBDC adoption journey with 88 at research, 20 proof of concept, 13 pilot, and 3 at launch.”
Interestingly, the central bank noted that at least four nations – Japan, Finland, Denmark, and Ecuador – have publicly canceled CBDC adoption plans, while another six nations have moved away from digital currencies because of structural and technological challenges in the implementation phase.
Some of these issues were the dominance of cash, high implementation costs, the risk of disrupting the existing ecosystem, and inefficient payment systems, according to the bank.
A major area being looked at by the developers is also the risks and controls linked to the issuance, distribution, usage, and counterfeiting of currencies. It added:
“Analysis of these findings indicate that majority of central bankers across the world have taken a cautionary approach in the CBDC implementation roadmap, to avoid any potential risks that can disrupt financial stability of their economies.”
At that stage, the bank is yet to give a clear timeline for when it will decide on CBDCs in Tanzania, but says it will continue:
“To monitor, research and collaborate with stakeholders, including other central banks, in the efforts to arrive at a suitable and appropriate use and technology for issuance of Tanzanian shillings in digital form.”
After the neighboring nations’ efforts to introduce CBDCs, Bank of Tanzania Governor Florens Luoga made an official announcement on November 26, 2021, that plans were already underway in Tanzania to expand research into digital currencies and strengthen the capacity of central bank officials.
Cryptos are majorly banned in Tanzania after a November 2019 directive from the Bank of Tanzania stated that digital assets were not recognized by local law.