Tanzania’s central bank says it is still considering the introduction of a central bank digital currency (CBDC) but it will be a “gradual, cautious and risk-based approach” after identifying a number of challenges that could hamper its implementation.
According to a January 14 public notice from The Bank of Tanzania, since the 2021 announcement of a possible CBDC rollout, the East African country is forming a multidisciplinary technical team to explore the risks and benefits of CBDC.
The bank stated that the team has conducted research on the different types of CBDCs, models for issuance and management and whether they can be token-based or account-based.
“Research results at this point reveal that more than 100 countries in the world are at various stages of the CBDC adoption journey with 88 in research, 20 proof of concept, 13 pilots and 3 at launch,” the bank said.
The central bank noted that at least four countries, Denmark, Japan, Ecuador and Finland, have canceled their plans to publicly adopt CBDC, while six others have moved away from digital currencies due to structural and technological challenges in the implementation phase.
Some of these challenges are high implementation costs, dominance of cash, inefficient payment systems and the risk of disrupting the existing ecosystem, the bank said.
Key areas the team looked at were risks and controls related to the issuance, distribution, counterfeiting and use of currency.
“The analysis of the findings shows that the majority of central banks around the world have taken a cautious approach in their CBDC implementation roadmap, to avoid potential risks that could disrupt the financial stability of the economy,” he said.
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At this stage, the bank has not given a clear timeline when it will make a decision on the CBDC in Tanzania, but said that it will “continue to monitor, research and collaborate with stakeholders, including other central banks, in an effort to achieve this goal. and appropriate and appropriate technology to issue Tanzanian shillings in digital form.”
Following the efforts of neighboring countries to introduce CBDC, the Governor of the Bank of Tanzania Florens Luoga announced on November 26, 2021 that there are plans in Tanzania to develop research into digital currency and strengthen the capacity of central bank officials.
Cryptocurrencies are largely banned in Tanzania after a November 2019 directive from the country’s central bank said the digital asset was not recognized by local law.