After months of research, the Tanzanian central bank announced recently that it had chosen a more cautious and risk-based approach towards the adoption of its central bank digital currency (CBDC). During the research phase, the central bank said it paid particular attention “to risks and controls associated with issuance, distribution, counterfeit and usage of currencies.”
Finding the Right CBDC Technology
The Bank of Tanzania (BOT) announced on Jan. 14 that it had “adopted a phased, cautious and risk-based approach to adoption of CBDC [central bank digital currency].” The bank also said it will continue with its efforts aimed at finding “a suitable and appropriate use and technology for issuance of Tanzanian shillings in digital form.”
According to a statement on the bank’s website, the BOT said it chose a more cautious approach after spending months researching and exploring the pros and cons of issuing the digital currency. During this period, the BOT said it found that other central banks had adopted the same posture, while six countries had chosen to cancel their CBDC adoption “mainly due to structural and technological challenges in the implementation phase.”
As reported by Bitcoin.com News in May 2022, the Tanzanian central bank said it planned to launch its CBDC because this had become a trend among central banks. In addition, the bank said the digital currency would be “a safe[r] alternative because many people are being affected by cryptocurrency speculators.”
However, fears the CBDC could disrupt the country’s financial system eventually forced the BOT, which signaled its readiness to launch in the first half of 2022, to adopt a more conservative approach.
Risks Associated With CBDCs
Meanwhile, during the research phase, the Tanzanian central bank revealed that it considered the type of CBDC to be issued, the models for issuance, the form of the digital currency, as well as the “degree of anonymity or traceability.” The statement also suggested the bank had given more attention to associated risks.
“Particular attention also is paid to risks and controls associated with issuance, distribution, counterfeit and usage of currencies,” the central bank said.
In the statement, the BOT said once the research is complete, the Tanzanian public will be given information on the way forward and this will likely include a roadmap for the “transition to CBDC adoption.”
Register your email here to get a weekly update on African news sent to your inbox:
What are your thoughts on this story? Let us know what you think in the comments section below.
