Browsing: CBDC

Zimbabwe's gold-backed digital currency

In May 2023, Zimbabwe released a gold-backed digital currency for peer-to-peer and business transactions. It acted as a store of value as the Zimbabwean dollar continued its steep depreciation. International gold prices controlled by the London Bullion Market Association will dictate the local pricing of Zimbabwe’s digital currency tokens.…

Frankfurt, Hesse, Germany - April 17, 2018: Many coins of various cryptocurrencies

Cryptocurrencies and the technology that enables them, blockchain, are here and they are here to stay.

They are not a fad. If there are circles, and there are many circles for that matter who still view them as a passing fad, then they are a fad that has been around for just over 14 years.

The first of the legions of cryptocurrencies, Bitcoin was invented in 2008 by a little known individual Satoshi Nakamoto. Protagonists of cryptocurrencies have touted the 14-year-old invention as humanity’s giant leap forward in financial innovation. Cryptocurrency’s longevity so far and its now widespread innovation, however, should not be taken as a ringing endorsement.

A loose definition of cryptocurrency is that it is a virtual currency designed to revolutionize peer to peer transactions without the need for an intermediary like a bank or a credit card agency, the exchange of personal information and or transaction…

Africa: A common currency dream verses a Central Bank Digital Currency future. www.theexchange.africa
  • It is not easy to create a common currency since it needs the creation of a central monetary system for several nations
  • The AU and ECOWAS should reconsider their approach—a common physical currency—and move their attention to building a common digital currency, as the EU is doing
  • With the establishment of the Pan-African Payment and Settlement System (PAPSS), which allows for the simple conversion of numerous African currencies, some progress—or maybe too little—has been achieved
  • When turned into digital money, Africa’s weak currencies have little chance against stablecoins backed by the US dollar

It is not easy to create a common currency and it would need the creation of a central monetary system for several nations.

This is a regime that, given the diverse economic demands of countries, may be judged undesirable for some member states. Africa’s desire for economic and monetary integration dates back many years.

African Union

Some cryptocurrencies. The beauty of transacting in cryptocurrencies in Africa is that they are not plagued with hyperinflation like the countries’ local currencies. www.theexchange.africa

CBDC is a digital currency issued by the central bank and intended to serve as legal tender while Crypto is a privately issued digital asset based on a network that is distributed across a large number of computers.

The fundamental difference between CBDC and Crypto is the former is asset-backed while the latter is not, so seeks to create value through some intrinsic mechanism like mining. One primary drawback is that the speculative nature of mining makes it considerably volatile.

This has given rise to “stable coins” which are crypto assets that aim to maintain a stable value relative to a specified asset, or a pool of assets. A Global Stable Coin (GSC) is a stable coin with potential reach and adoption across multiple jurisdictions and could achieve substantial volume down the line.…

Central Bank of Rwanda head office in the capital Kigali. www.theexchange.africa

In October 2021 Nigeria became the first country in Africa and of among few in the world to issue a digital currency that was dubbed ‘eNaira’.

Financial experts say the digital currency issued by central banks cut transaction costs and increase financial inclusion.

Maurice Muhiza Rwamigabo, Head of Exploration & Coordinator at the Accelerator Lab (an innovation and technology lab) of the United Nations Development Programme (UNDP) in Rwanda, said in an opinion article titled ‘Should Rwanda adopt a national digital currency?’ that if Rwanda wants to restructure its financial system and position itself as an important player in the future global economy, it should systematically assess and take the steps needed to develop its own Central Bank Digital CBDC. 

“A CBDC would offer Rwandans a safe, free, and easy alternative to cash. It would expand financial inclusion by enabling more of the unbanked population to participate in the formal …

The West African Monetary and Economic Union. Experts say that the emergence of the CBDCs will sabotage the common currency project in West Africa. www.theexchange.africa

Whether Nigeria and Ghana will abandon their digital currencies and jump on the Eco train is an unclear narrative, but it appears unlikely because of the significant investments put into them and the optimism by the governments to embrace digital transformations.

Nigeria had banned cryptocurrency transactions in February last year which increased the popularity of the eNaira as an alternative for cross-border trade and remittance inflows.

eNaira critics say that the solutions being offered by the digital currency are already existing in online banking and bank card transactions. …

The Central Bank of Tanzania (BoT) is planning in creating its own digital currency. This is not the first time Tanzania has expressed interest in a digital currency. www.theexchange.africa

Since Tanzania is still conducting research on cryptocurrencies, rules to govern the sector will be issued after research on crypto is complete. Currently, Tanzania has no regulations for cryptocurrencies and those trading in the sector have been urged to be cautious.
However, there is no timeframe for when regulations will be issued.
In June, President Suluhu asked the country’s financial leaders to prepare for crypto and blockchain as the country drops its conservatism and flies its doors open to the new era of digital currency.…