13 African nations are reportedly testing, implementing, and even adopting central bank digital currencies at different phases, according to the International Monetary Fund (IMF).
Given that they are distributed and governed by central banks, CBDCs are digital forms of cash that are more reliable and less erratic than crypto assets.
According to the IMF chart, a breakdown of African nations at various phases of CBDC implementation shows that Nigeria has already deployed the CBDCs, Ghana, South Africa, and Eswatini piloting while Zimbabwe, Zambia, Madagascar, Namibia, Tanzania, Uganda, Mauritius, Rwanda, and Kenya are all researching.
As part of stage 2 of Project Khokha, the South African Reserve Bank is experimenting with a wholesale CBDC that can only be used by financial firms for interbank payments.
Additionally, the nation is taking part in a cross-border experiment with the central banks of Singapore, Malaysia, and Australia.
The e-Cedi, a broad sense or retail CBDC being tested by the Bank of Ghana, can be used anywhere who has a mobile wallet application or a contactless card that can be used offline.
Following CBDCs is justified for a number of reasons, including:
- If created for offline use, CBDCs could provide financial services to persons who previously lacked bank accounts.
- In particular, during abrupt crises like a pandemic or natural disaster, CBDCs might be utilized to give targeted welfare payments.
- CBDCs can help with cross-border payments and transfers, such as remittances, which are around $8 more expensive outside of Africa.
Governments will need to increase access to digital infrastructures like phone and internet connectivity, according to the IMF.
The international organization also asserts that to manage the threats to financial integrity and data privacy, particularly those posed by possible cyberattacks, central banks will need to acquire the knowledge and technical competence.
Additionally, there’s a chance that people would withdraw excessive amounts of cash from their banks to buy CBDCs, which could limit the banks’ capacity to lend.
The impact of CBDCs on the private sector of digital payment services, which has made significant progress in boosting economic growth through mobile money, will also need to get considered by central banks.
Don’t miss important articles during the week. Subscribe to blockbuild weekly digest for updates.