What’s Inside The BIS Research Report on CBDCs in Africa?
BIS or Bank for International Settlements is a Committee of banking supervisory authorities. It helps to promote financial stability through better coordination and interaction between all the International Financial Institutions.
CBDCs in Africa: BIS
On November 24, 2022, BIS published a Research Paper, which is based on a survey to Central banks, analyzes the development, motivations and concerns of Central Bank Digital Currencies (CBDCs) in Africa, and other emerging and development regions.
A new survey with 19 African central banks shows that the main concern regarding #CBDCs is cybersecurity, even more than elsewhere. High operational burden for the central bank is also a bigger concern than in other regions https://t.co/FzkCq5POOD pic.twitter.com/XqYHjRwyRv— Bank for International Settlements (@BIS_org) November 24, 2022
BIS described its new survey with 19 African central banks. The survey shows that “the main concern regarding CBDCs is cybersecurity, even more than elsewhere. High operational burden for the central bank is also a bigger concern than in other regions.”
According to the report, only Nigeria has issued a retail CBDC, the eNaira, while Ghana and South Africa are running pilot projects (retail and wholesale, respectively). Additionally, South Africa has also participated in the Dunbar multi-currency (mCBDC) project coordinated by the BIS Innovation Hub.
Here, CBDCs or Central Bank Digital Currency is a digital form of currency that is issued by Central Banks.
The 23-page long BIS-paper is prepared by Enrique Alberola and Ilaria Mattei. This paper showed the interest of African central banks in CBDCs has shot up in recent times. While all of those surveyed are analyzing CBDCs, only few have projects at advanced stages (pilot or live).
Some countries, in particular in East and West Africa, stand out as promoting fast payment systems through mobile money. On the other hand, half of the surveyed central banks said CBDCs can provide a superior solution. Here the key motivation for African central banks is achieving greater payment system efficiency.
It must be noted that less than half the adult African population was banked in 2021.
The report noted that a CBDC would “support new digital technologies and their integration with the broader economy.”
Central banks in Africa also place more emphasis on financial inclusion so it could foster CBDC issuance and favor adoption. Meanwhile, they are more worried than other regions about cyber security risks and cross-border spillovers and are also concerned about high operational burdens. All in all, differences in motivations, concerns and other country-specific factors determine how central banks are approaching CBDCs.
Currently, more than 100 countries are exploring CBDCs, while The Bahamas, was the first country in the world that launched a CBDC, Sand Dollar.
The research report concludes with high-level takeaways. Throughout, the note draws on the comparison between Africa and other emerging market economies (EMEs), as analyzed in a recent report (BIS (2022b)) that used the same survey structure.
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