The Bank of Tanzania is considering adopting the issuance of a central bank digital currency (CBDC).
The apex bank said, in a press release, it will continue to monitor, research, and collaborate with stakeholders including other central banks, to arrive at suitable and appropriate use and technology for the issuance of Tanzanian shillings in digital form.
Upon completion of the research, the Bank said it would provide information to the public on the way forward which may include a roadmap for the transition to the adoption of CBDC.
Central Banks’ interest in CBDCs has increased in recent years around the world. According to the research by The Bank of Tanzania, more than 100 countries in the world are at different stages of the CBDC adoption journey with 88 at research, 20 proof of concept, 13 pilot and 3 at launch.
However, banks are taking a cautionary approach in the CBDC implementation roadmap, to avoid any potential risks that can disrupt the financial stability of their economies.
The structural challenges standing in the way of the implementation of CBDCs include the dominance of cash in making transactions and the existence of inefficient payment systems, high implementation costs and the risk of disrupting existing ecosystems.
In Africa, the Central Bank of Nigeria issued the eNaira, Africa’s first Central Bank Digital Currency (CBDC) in 2021. Botswana, Ghana, Kenya, South Africa, Tanzania, Uganda, and Zimbabwe are at various stages of crypto regulation and issuance of CBDCs.
Through CBDCs, Central Banks aim to increase financial inclusion, improve the effectiveness of their monetary policies and reduce cash distribution costs among others.