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Tanzania plans cautious central bank digital currency launch

Tanzania’s central bank has revealed that it’s working toward a phased, cautious and risk-based introduction of a digital currency.

By Anna B Kiwanuka

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Tanzania’s central bank said that it is still considering the introduction of a central bank digital currency (CBDC) but will be a taking phased, cautious and risk-based approach after identifying several challenges that could impact its implementation.

The Bank of Tanzania organized a multidisciplinary technical team to investigate the risks and advantages of CBDCs after making a 2021 announcement about a potential CBDC rollout, according to a public notice issued on January 14 by the institution.

The bank also revealed that its team has conducted research looking into different types of CBDCs, models for issuance and management, and whether its CBDC should be token-based or account-based.

The bank stated, “The outcome of the research at this point revealed that 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.” 

The central bank also noted that at least four countries that is to say, Denmark, Japan, Ecuador, and Finland have publicly canceled CBDC adoption plans, while another six have moved away from digital currencies due to structural and technological challenges in the implementation phase.

According to the Central bank of Tanzania, some of these challenges impeding successful CBDC launches around the world, include high implementation costs, the dominance of cash, inefficient payment systems, and the risk of disrupting the existing ecosystem.

The central bank team is also focusing on the risks and controls related to the creation, distribution, counterfeiting, and use of currencies.

“Analysis of these findings indicate that majority of central bankers across the world have taken a cautionary approach in the CBDC implementation roadmap, in order to avoid any potential risks that can disrupt financial stability of their economies,” it added.

The bank says it will continue to monitor, research, and work with stakeholders, including other central banks, in the efforts to find a suitable and appropriate use and technology for the issuance of Tanzanian shillings in digital form. At this point, the bank has not provided a clear timeline for when it will make a decision on CBDCs in Tanzania.

Following neighboring countries’ efforts to introduce CBDCs, Bank of Tanzania Governor Florens Luoga made a November 26, 2021, announcement that plans were underway in Tanzania to expand research into digital currencies and strengthen the capacity of central bank officials.

However, cryptocurrencies are still largely banned in Tanzania following a November 2019 directive from the Bank of Tanzania saying the digital assets were not recognized by local law.


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