Bank of Tanzania Preparing for the Launch of CBDC

The Bank of Tanzania is exploring ways to introduce a Central Bank Digital Currency (CBDC) on its monetary system to enhance the domestic payment system. That is according to Bloomberg media outlets.

Speaking at the 20th Conference of Financial Institutions (COFI) last Thursday, November 25, Bank of Tanzania Governor Florens Luoga announced that Tanzania is planning to follow Nigeria’s footsteps in launching its own national digital currency.

“To ensure that our country is not left behind by the adoption of central bank digital currencies, the Bank of Tanzania has already begun preparations to have its own CBDC,” he said.

As a result, Luoga stated that the central bank is also planning to expand research into digital currencies and strengthen the capacity of central bank officials. If the country succeeds, it would be among a select group of nations currently exploring a launch of a CBDC.

The governor admitted the initiative was inspired by Nigeria’s move to roll out its own CBDC last month.

Nigeria, the only country in Africa, is the latest to launch its CBDC. Last month, Nigeria became the third nation to make its CBDC fully available to the public after the Bahamas and Cambodia became the first and second nations respectively in the globe to fully roll out their central bank digital currencies late last year.

Luoga also stated that the central bank wants to diversify its foreign exchange reserves. To actualize this plan, the Bank of Tanzania will purchase gold from local refineries. “The monetary gold that we plan to buy should have a purity of not less than 99.5%,” he said.

The governor expects the nation’s inflation rate to remain within the targeted range of 3% to 5% in 2021-22.

Luoga further stated that that the Bank of Tanzania is still cautious of private crypto assets. He reminded the public about the illegal status of such cryptocurrencies in the country, urging them to be wary of investing.

Tanzania banned cryptocurrencies in November 2019 following a directive from the nation’s central bank, stating that the virtual coins were not recognized by local law. However, this may soon change as the central bank reportedly works with the national government to reverse the ban.

In June this year, Tanzania’s President Samia Suluhu Hassan called for the necessary preparation for cryptocurrencies and blockchain technologies. She made such an announcement after she became president following the death of the late president John Magufuli. So far, the Bank of Tanzania is still preparing for digital cryptocurrencies – working on the directives and will update the media on the progress made in due course.

Nations Exploring CBDCs Rise

The interest of nations looking to roll out their own central bank digital currencies (CBDCs) has more than doubled so far.

In May 2020, only 35 nations considered having their own national digital currencies, but now 81 countries are engaging in such interests. These 81 nations represent over 91% of the world’s gross domestic product (GDP).   

The reason why a nation is looking to launch a government-based digital currency varies from economy to economy – some want the CBDC to be part of the monetary ecosystem. In contrast, others just want to replace private cryptocurrencies.

Meanwhile, China is leading the way when it comes to CBDCs. Its digital yuan is currently being tested countrywide, across multiple use cases, including medical insurance, and allowing use by foreign nationals.

Image source: Shutterstock