Tanzania’s top financial officials asked for a clearer global agreement on Central Bank Digital Currencies (CBDCs) and crypto-assets on Tuesday, as the Government ponders on how to proceed with the fast-evolving concepts.
Mwigulu Nchemba, Tanzania’s Finance and Planning Minister, said at a regional conference hosted by the Bank of Tanzania and the International Monetary Fund that both topics needed more “thorough discussions” before the country could make commitments, a view shared by Bank of Tanzania Governor Prof Florens Luoga.
The virtual convention, which continued on Wednesday, was organized for Anglophone countries in Sub-Saharan Africa to learn more about issues like financial inclusion and integrity, digital and cybersecurity risks, legal issues, and interoperability in relation to CBDCs and cryptocurrency transactions.
A similar conference for Francophone countries in Sub-Saharan Africa is expected later this year.
The Bank of Tanzania is “finalizing preparations of a business case for the establishment of a CBDC in Tanzania and evaluation of crypto assets after recording significant progress” in formalizing digital financial services, according to Dr. Nchemba.
“Banks [in Tanzania] have developed solutions to integrate informal small business and saving groups to the formal banking system through digital platforms. These innovations will demand reforms in legal and institutional structures to enable requisite governance,” the minister said.
CBDCs and crypto assets, according to Prof Luoga, have become “important current challenges” affecting Central Bank policy and operations around the world.
“We need solutions to the challenges we have faced or expect to encounter in dealing with these issues. For CBDCs, it is apparent that some Central Banks are still at conceptual discussions and research, others already have set the ball rolling to the experimentation phase, and a few have launched,” Prof Luoga said.
“Crypto assets have increasingly become common, and due to their ramifications, there is a quest for interventions through tighter regulations.”
Central banks in each nation are expected to define their own major objectives before implementing CDBCs, according to IMF deputy managing director Bo Li, “since there is no universal formula for all countries.”
Mr Li stated that the IMF’s major goal in the global cryptocurrency debate is to promote the creation of a “strong, comprehensive, and consistent regulatory framework” for crypto asset transactions.
“In both cases (CBDCs and crypto assets) it is important to ensure a balance between protecting consumer privacy and promoting financial inclusion and integrity,” he said.
The IMF has stated that it “neither encourages nor discourages” nations from issuing CBDCs, but it does offer technical advice to those who do so on design characteristics that support public policy goals while also ensuring that payment systems are efficient, resilient, and competitive.
Experimentation with CBDCs in Sub-Saharan Africa is still in its early phases, according to a conference concept note.
Kenya and Tanzania are among the nations in Sub-Saharan Africa that have “recorded rapid uptake of crypto assets,” according to data released by the Fund’s Chainalysis subsidiary. Nigeria, South Africa, and Ghana are the other countries.
“These countries rank high on the index, in large part, because they have huge transaction volumes on P2P platforms. Many residents use P2P platforms as their primary on-ramp into cryptocurrency, often because they lack access to centralized exchanges,” says the note.
When the eNaira was introduced in October 2021, Nigeria became the first African country to formally implement a CBDC. Ghana and South Africa are in various phases of testing, and Kenya has recently released a white paper on a proposed CBDC.