The National Bank of Ethiopia (NBE) has drafted two proclamations as part of an economic reform strategy. One of these involves setting up a legal framework to introduce a central bank digital currency (CBDC).
The NBE Proclamation envisions policy modifications that would establish a legal structure for a CBDC “as deemed necessary,” increase the NBE’s capital, and lay down a legal foundation for consumer protection. The accompanying Banking Business Proclamation deals with the liberalization of foreign investment in banking, measures to address “problem” banks, and the establishment of a regulatory sandbox for innovative financial solutions.
The Council of Ministers has given its approval to these proclamations, which are set to be presented in the House of Representatives soon.
The central bank is looking to implement extensive reforms
These proclamations are part of the government’s Homegrown Economic Reform Agenda. The Reporter, a privately owned Ethiopian newspaper, highlighted the government’s interest in a CBDC back in April, mentioning the launch of a study in June. It was also mentioned that the NBE aims to become a part of “the Cross Border Payment System” by December, although specific details about this system were not provided.
Ethiopia has already taken steps towards economic liberalization by ending the state monopoly on mobile money services. The country is already utilizing blockchain-based digital infrastructure for significant government payments.
Africa has had a varied experience with cryptocurrencies
Despite challenges like low internet penetration, crypto adoption is gaining ground in several African nations. However, not all attempts to introduce cryptocurrencies have been successful. For instance, the Central African Republic adopted Bitcoin as a currency and introduced a non-CBDC government cryptocurrency named Sango, which has had limited success. At present, the Sango currency website is not operational.
Digital currencies are currently illegal in Ethiopia, but numerous data mining firms have obtained licenses to capitalize on the country’s low-cost electricity for crypto mining. Plans are also underway to introduce the Web3 Fuse payment system in the country.
Approximately 18 African countries are exploring CBDCs, with Nigeria experiencing mixed results with the eNaira, launched in 2022 as the world’s second live CBDC. Zimbabwe utilized a government-issued gold-based token as the foundation for its latest currency introduction.
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