After months of studying Central Bank Digital Currency (CBDC), the Central Bank of Tanzania is clearly not convinced by the potential of this type of asset. In a recent statement, the bank said it favors a gradual, cautious and risk-based approach to CBDC adoption. Thus, the launch of CBDC in this Central African country will not happen as soon as previously thought.
Tanzania not yet convinced by CBDC
Touted as a financial innovation offering a safe alternative to cryptocurrencies, CBDC (Central Bank Digital Currency) has been in vogue in several states in recent years. The fact that this asset is controlled by central banks fascinates many countries, but not all.
Tanzania is one of those states showing some skepticism towards CBDC. In a recent statement, the Tanzanian Central Bank announced that for the time being, it is advocating a gradual, cautious and risk-based approach to the adoption of CBDCs. The Bank of Tanzania will continue to monitor and study CBDC to determine the appropriate use of this asset.
The Bank of Tanzania will continue to monitor, study and collaborate with stakeholders, including other central banks, in the efforts to achieve appropriate use and utilization of CBDC for the issuance of Tanzanian shillings in digital form.Tanzanian Central Bank.
CBDC has risks, Tanzania Bank concludes
In making this statement of tacit disavowal of the CBDC, the Central Bank of Tanzania knows what it is talking about. The decision was taken after extensive research, discussion and consultation on the subject.
Since 2021, the Bank of Tanzania has established a multidisciplinary technical team to examine the practicalities of the CBDC. In addition, a conference of international financial institutions on CBDC has been organized to better understand CBDC. In addition, the Tanzanian Central Bank consulted with various stakeholders and participated in various economic forums on the subject.
At the end of this long process, the central bank says it has not yet found an approach to adopt CBDC that is suitable for the Tanzanian context. The bank is even concerned that the CBDC could disrupt the country’s financial stability. Indeed, the CBDC may complicate the control of currency issuance, distribution, counterfeiting and use, according to the Bank of Tanzania.
The experience of CBDC development in other states does not reassure Tanzania either. Of the more than 100 countries with CBDC plans, only three have actually launched a CBDC. On the other hand, 88 states are still researching the subject and 13 are in the test phase. 6 countries have cancelled their CBDC adoption plans altogether. The main reasons for this are structural and technological challenges.
Given the abysmal failure of CBDC in Nigeria, Tanzania is right to take a cautious approach to this issue. Perhaps after a few months of research, the country will simply abandon its CBDC project as some states have done. However, one should not be under any illusions. Tanzania is a very undemocratic state. As China is already doing, Tanzania could find in CBDC a way to strengthen the control of its citizens…
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