Banking and finance is one of the many sectors moving towards digitization. One of the newly implemented concepts of digitization of money is the Central Bank Digital Currency (CBDC).
It is an alternative of the cryptocurrency that attempts to promote security, ease, fluidity in transactions, and to also effectively regulate the money and infuse all citizens into a process of inclusion.
CBDC will completely digitize the monetary system and will receive full support from the government.
Central Bank Digital Currency is an innovation aimed at providing a solution to the problem of global payment issues, taking advantage of the blockchain system’s idea to keep money in virtual form.
The Central Bank of the country regulates and distributes this money like fiat money. The CBDC can also be used to purchase, transfer, offer other uses like fiat money.
As of writing, Eighty-seven governments are exploring how they can benefit from the CBDCs. Some of these benefits include;
- Automation; which means, the regulation of money will be easier for governments and banks
- Restriction in the involvement of third-party, establishment of direct connection of the central bank and the consumer.
- Provision of privacy for the consumer by keeping transactions pseudonymous.
- Prevention of illegal activities by tracking transactions, making the process easy for LEAs.
- Facilitates the inclusion of those who don’t have access to banks
With 17 countries piloting, and 7 having fully launched, The process of digitization of money and CBDCs is taking root across the world.
Some of these countries include; Korea, France, China, Canada, Uruguay, UAE, Singapore and other countries including five African countries (Nigeria, Tunisia, Jamaica, Ghana and South Africa)
Nigeria
The giant of Africa, Nigeria, appears to be the first to move towards issuing a CBDC, With the launch of the eNaira, the Nigerian government hopes to usher in an era of digital finance in the country which is currently plagued by financial inequality and a lack of banking opportunities for its citizens.
Africa has also become the second-highest crypto remittance region this year and is now an emerging platform for digital transformation.
Nigeria, being the first country in sub-Saharan Africa to adopt a digital currency, is joining China and several other countries to use a central bank regulated electronic tender.
South Africa
As of May 25, 2021, The South African Reserve Bank stated that it is considering the implementation of the CBDC and will be carrying out research to look at the feasibility of using it as a legal tender. Speaking to a news outlet, the SARB said, “The objective of the study is to review how the issuance of a general-purpose CBDC will fit into the SARB’s policy position and mandate. The SARB is one of a number of central banks looking to implement the digitalization of its currencies.”
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