Tanzania's central bank says it is still considering the introduction of a central bank digital currency (CBDC) but will take a "gradual, cautious and risk-based approach" after identifying several challenges that could affect its implementation.
According to a public on January 14 realize of the Bank of Tanzania, since its 2021 announcement about a possible CBDC implementation, the East African country formed a multidisciplinary technical team to explore the risks and benefits of CBDCs.
The bank revealed that its team has conducted an investigation to investigate different types of CBDCissuance and management models and whether it could be token-based or account-based.
"The result of the investigation at this point revealed that more than 100 countries in the world are at different stages of the CBDC adoption journey with 88 in research, 20 proof of concept, 13 pilot and 3 in launch," said the bank.
The central bank noted that at least four countries, Denmark, Japan, Ecuador and Finland, have Publicly Canceled CBDC Adoption Planswhile there were six others that have moved away from digital currencies due to structural and technological challenges in the implementation phase.
Some of these challenges were high implementation costs, the dominance of cash, inefficient payment systems and the risk of disrupting the existing ecosystem, the bank noted.
A key area the team is looking at is also the risks and controls associated with the issuance, distribution, counterfeiting and use of coins.
"Analysis of these findings indicates that most central bankers around the world have taken a precautionary approach to the CBDC implementation roadmap, to avoid any potential risks that could disrupt the financial stability of their economies," added.
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At this stage, the bank has not given a clear timeline on when it will make a decision on CBDCs in Tanzania, but says it will "continue to monitor, investigate and collaborate with stakeholders, including other central banks, in efforts to reach a proper and appropriate use and technology for the issuance of Tanzanian shillings in digital form".
Following efforts by neighboring countries to introduce CBDCs, Bank of Tanzania Governor Florens Luoga announced on November 26, 2021 that plans were underway in Tanzania to expand research on digital currencies and strengthen the capacity of banks. central bank officials.
Cryptocurrencies are largely banned in Tanzania following a November 2019 directive from the country's central bank that said digital assets were not recognized under local law.
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