The National Bank of Rwanda (NBR) is the newest African central bank to join the digital currency movement after a staff member confirmed the institute is looking into issuing its own digital currency.
Impact of the CBDC on financial stability
According to employee John Karamuka, this study examines economic, financial and technical aspects related to digital central bank currencies (CBDC) as well as “the operationalization model”. The study will also analyze the “Impact of the CBDC on Monetary Policy and Financial Stability”.
However, in his remarks to The New Times, Karamuka revealed that the study had revealed the limitations or lack of global standards and reliable benchmarks on the subject. In the African continent, some countries, namely Nigeria, Ghana and Tanzania, have recently either signaled plans to research CBDCs or made progress in developing CBDCs. Yet few countries worldwide, including small nations like the Bahamas and the Republic of the Marshall Islands, have made real progress with their CBDC projects.
Meanwhile, Karamuka, director of payments systems at the NBR, explains how his organization has tried to measure its own progress. He said:
Nonetheless, we compare countries that are at a more advanced stage and learn both positive and negative experiences. We rely on the work of international institutions such as the International Monetary Fund, the World Bank, the World Economic Forum and others.
The need for the CBDC
The New Times report also included the reaction of the leader of the Rwandan crypto and blockchain community to the revelations. Norbert Haguma, chairman of the Rwanda Blockchain Association, questions the need for a CBDC. He said:
“A CBDC should retain the best of both cash and existing e-wallet solutions: cash can be exchanged offline with no restrictions or fees, while digital payments such as mobile money allow instant remote transfers.”
In addition, Haguma suggests that the financial inclusion and interoperability of the CBDC should also be key factors that need to be considered as well. Following the Karamuka revelations, Rwanda, whose central bank warned of Bitcoin trading in 2018, is the youngest African country to signal its willingness to embrace emerging fintechs. The revelations come a few weeks after the Central American nation El Salvador made Bitcoin legal tender.
What do you think of the NBR digital currency study revelations? Let us know what you think in the comments section below.
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