Tanzania plans to launch CBDC after eNaira launch
The COVID-19 pandemic has hastened the global transition to cashless payment options. Today’s global economy requires technology that enables consumers to make payments rapidly, cheaply, and without the involvement of intermediaries. The country’s central bank has announced the creation of its digital currency, but will it be in demand in the market?
After neighboring governments announced similar initiatives, the Bank of Tanzania is proposing to launch a central bank digital currency (CBDC), for the African country. The national digital currency, as Florens Luoga stated at the Central Bank’s 20th Conference of Financial Institutions (COFI), will lower transfer costs and boost public involvement in the public financial system. Nigeria was the first country in Africa to create a fiat-based digital currency. Tanzania, according to the regulator’s chief, would follow Nigeria’s lead. Previously, the nation introduced eNaira, a digital version of the naira. This method of payment is intended to supplement and reinforce actual cash.
Furthermore, Tanzania aims to boost research into digital currencies and strengthen the competence of central bank employees as it prepares to launch CBDC, according to the governor. Tanzania, if successful, will join several countries investigating CBDC implementation. By the way, CBDC is a virtual version of a certain state’s official currency that employs an electronic form or digital asset. The central government’s currency corresponds to the official currency. Furthermore, although CBDC is a digital form of legal money, it will be backed by a specific amount of actual capital reserves. Digital currency does not exist in tangible form. It is always kept on the computer network and distributed via digital methods. As a result, the digital currency will always exist in electronic form (i.e., it cannot be converted into cash).
However, cryptocurrencies are mainly prohibited in Tanzania, after a decree issued by the country’s central bank in November 2019 stating that digital assets are not authorized by local law. The Bank of Tanzania, on the other hand, is seeking to lift the restriction after President Samia Suluhu Hassan stated in June that the government should prepare for cryptocurrencies’ arrival.
In general, Nigeria was the first country in Africa to introduce digital money based on fiat currency. China, South Korea, and Japan are still exploring the potential of digital currency. The Bank of Japan began testing CBDC in the summer of 2020. In the first stage, the regulator plans to investigate the technical feasibility of deploying the digital yen. In the fall of 2020 that the Bahamas were the first country in the world to implement CDBC. It appears that CBDB will become widely available to common individuals in the next few years and will be able to contribute to the growth of global finance.
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