The National Bank of Ethiopia (NBE) has drafted two proclamations as part of a comprehensive economic reform strategy. One of these proclamations focuses on establishing a legal framework for the introduction of a central bank digital currency (CBDC).
The proposed policy changes outlined in the NBE Proclamation include the development of a legal structure for a CBDC “as deemed necessary,” along with plans to increase the NBE’s capital and establish legal provisions for consumer protection. The accompanying Banking Business Proclamation addresses the liberalization of foreign investment in the banking sector, measures to address issues with “problem” banks, and the creation of a regulatory sandbox for innovative financial solutions.
The Council of Ministers has given its approval to these proclamations, which will soon be presented to the House of Representatives for further consideration.
The central bank has outlined extensive reforms
These proclamations are part of the government’s Homegrown Economic Reform Agenda. The Ethiopian newspaper, The Reporter, previously mentioned the government’s interest in exploring a CBDC back in April, with plans to commence a study in June. Additionally, the NBE aims to join “the Cross Border Payment System” by December, although specific details regarding this system have not been disclosed.
Ethiopia has already taken steps towards economic liberalization, including the removal of the state monopoly on mobile money services. The country has also implemented a blockchain-based digital infrastructure for significant government transactions.
Africa has a varied experience with cryptocurrencies
Despite challenges such as low internet penetration, the adoption of cryptocurrencies is gaining momentum in several African nations. While some attempts to introduce cryptocurrencies have not been successful, others have shown promise. For instance, the Central African Republic adopted Bitcoin as a currency and introduced a non-CBDC government cryptocurrency called the Sango, although its website is currently inactive.
Although digital currencies are currently prohibited in Ethiopia, numerous data mining firms have applied for licenses to capitalize on the country’s affordable electricity for cryptocurrency mining. There are also plans to introduce the Web3 Fuse payment system in the country.
Approximately 18 African countries are exploring the possibility of CBDCs, with Nigeria launching the eNaira in 2022 as the world’s second operational CBDC. Zimbabwe utilized a government-issued gold-based token to facilitate the introduction of its latest currency.
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