Tanzania Hovers over Decision to Launch CBDC
Before deciding to adopt CBDCs, the Bank of Tanzania is awaiting the results of its investigation on them. The Central Bank of Tanzania mentioned that while it is still considering whether to establish a central bank digital currency (CBDC), it will go forward with a “phased, cautious, and risk-based approach” after finding several potential barriers to doing so.
The Bank of Tanzania apparently formed a multidisciplinary technical team to look into the benefits and drawbacks of CBDCs in response to its 2021 announcement regarding a prospective CBDC rollout.
The bank revealed that its team has investigated several CBDC kinds, mechanisms for issuance and management, and if its CBDC should be account-based or token-based.
The report’s findings, according to the bank, “show that more than 100 nations worldwide are currently at various phases of the CBDC adoption journey, with 88 at research, 20 proof of concept, 13 pilot, and 3 at launch.”
At least four nations—Denmark, Japan, Ecuador, and Finland—have openly abandoned their plans to adopt CBDCs, while another six have abandoned their plans because of implementation-related structural and technological difficulties.
High implementation costs, the prevalence of currency, ineffective payment systems, and the potential for ecosystem disruption were some of the difficulties, according to the bank.1
The group is also concentrating on the dangers and security measures connected to the production, usage, and falsification of money.
In order to prevent any potential risks that could undermine the financial stability of their economies, the majority of central bankers worldwide have adopted a cautious approach to the CBDC implementation plan, according to an analysis of these findings.
The bank has not yet given a timeframe by which it will decide whether to support CBDCs in Tanzania; all it has said is that it will “continue to monitor, research, and collaborate with stakeholders, including other central banks, in the efforts to arrive at a suitable and appropriate use and technology for issuance of Tanzanian shillings in digital form.”
Following a November 2019 instruction from the Bank of Tanzania stating that digital assets were not recognized by local law, cryptocurrencies are mainly prohibited in Tanzania.