Tanzania Considers Introduction of Central Bank Digital Currency
A new building of Dar es Salaam Standard Gauge Railway (SGR) terminus is seen as Tanzania received 14 economy class carriages of South Korean company Sung Shin Rolling Stock (SSRT) in Dar es Salaam on November 25, 2022
The growing role of digital currencies draws the attention of the world’s governments seeking to find a way to stabilize their countries’ financial systems by introducing new technologies.The Bank of Tanzania is considering the introduction of a central bank digital currency (CBDC), the institution stated, saying that it “has adopted a phased, cautious and risk based approach” to the issue.
"The Bank of Tanzania will continue to monitor, research and collaborate with stakeholders, including other central banks, in the efforts to arrive at a suitable and appropriate use and technology for issuance of Tanzanian shillings in digital form," the bank said.
It did not specify when the project is planned to be implemented.The institution said it pays particular attention to “risks and controls associated with issuance, distribution, counterfeit and usage of currencies.” The central bank is taking into account the experience of other states, noting that six countries have canceled the adoption of CBDC due to challenges in the implementation phase.”The structural challenges include dominance of cash in making transactions and existence of inefficient payment systems, high implementation cost and risk of disrupting existing ecosystem,” the statement reads.For governments that wish to make use of digital currency systems, one of the primary concerns is the high volatility of the world’s most popular digital currencies, which are based on decentralized systems. Possible ways for a state to have more control over the currency include adoption of what is known as stablecoins (decentralized currencies, or cryptocurrencies, with price fixed to a reference asset) or, otherwise, centralized digital currencies such as CBDC.In October 2021, Nigeria became the first African country to introduce the use of a central bank digital currency, eNaira. According to the country’s government, the currency “serves as both a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments.”South Africa and Ghana have been reported to participate in pilot CBDC projects, with several other African countries being in the research stage.