The Bank of Tanzania is awaiting the results of its CBDC research before making a final decision on adoption.
Tanzania’s central bank says it is still exploring introducing a central bank digital currency (CBDC), but will do so in a “phased, cautious, and risk-based approach” after discovering various obstacles that could stymie its deployment.
According to a public notice issued by The Bank of Tanzania on January 14, following its statement regarding a prospective CBDC deployment in 2021, the East African government organised a multidisciplinary technical committee to investigate the risks and benefits of CBDCs.
The bank said that its team did research into several types of CBDCs, issuance and administration models, and whether its CBDC should be token-based or account-based.
“At this point, the research has indicated that more than 100 nations around the world are at various levels of CBDC adoption, with 88 at research, 20 proof of concept, 13 pilot, and 3 at launch,” the bank stated.
According to the central bank, at least four countries — Denmark, Japan, Ecuador, and Finland — have openly shelved CBDC adoption plans, while another six have backed away from digital currencies due to structural and technological hurdles in the implementation phase.
According to the bank, some of these issues included high implementation costs, the dominance of cash, inefficient payment methods, and the risk of disrupting the existing ecosystem.
The team is also looking into the risks and controls connected with the issuance, distribution, counterfeiting, and use of currencies.
“Analysis of these findings indicates that the majority of central bankers around the world have taken a cautious approach in the CBDC implementation plan, in order to minimise any potential risks that could disturb financial stability of their economies,” the report continued.
At this point, the bank has not specified a timetable for making a decision on CBDCs in Tanzania, but it has stated 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 the issuance of Tanzanian shillings in digital form.”
Following neighbouring nations’ efforts to implement CBDCs, Bank of Tanzania Governor Florens Luoga announced on November 26, 2021, that Tanzania was expanding research into digital currencies and strengthening the capacity of central bank employees.
Following a November 2019 instruction from the Bank of Tanzania stating that digital assets were not recognised by local law, cryptocurrencies are mostly prohibited in Tanzania.