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Key takeaways:
- The Bank of Tanzania is hesitantly preparing to launch its digital money.
- The team also focuses on the risks and safeguards related to the creation, circulation, falsification, and use of currencies.
The central bank of Tanzania says it is still debating whether to launch a central bank digital currency (CBDC), but it would proceed with a “phased, cautious, and risk-based approach” after finding several issues that might hinder its adoption.
The Bank of Tanzania organized a multidisciplinary technical team to investigate the risks and advantages of CBDCs following its 2021 announcement on a potential CBDC launch, according to a public notice issued by the institution on January 14.
The bank disclosed that its team has looked into several approaches for issuing and managing CBDCs and whether or not its CBDC should be account-based or token-based. The bank stated:
“The outcome of the research at this point revealed that more than 100 countries in the world are at different stages 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At least four nations, Denmark, Japan, Ecuador, and Finland, had openly withdrawn their plans to adopt CBDCs, while another six had abandoned their plans due to structural and technological difficulties with the implementation stage.
According to the bank, some of these challenges include high implementation costs, the ubiquity of money, inefficient payment methods, and the possibility of ecosystem disruption. The dangers and restrictions related to the creation, circulation, falsification, and use of currencies are other vital issues the team is examining. The bank added:
“Analysis of these findings indicate that majority of central bankers across the world have taken a cautionary approach in the CBDC implementation roadmap, in order to avoid any potential risks that can disrupt financial stability of their economies,”
The bank says it will continue to monitor, research, and work with stakeholders, including other central banks, to find a suitable and appropriate use and technology for the issuance of Tanzanian shillings in digital form. However, at this time, the bank still needs to provide a clear timeline for when it will decide on CBDCs in Tanzania.
On November 26, 2021, Bank of Tanzania Governor Florens Luoga announced that plans were underway in Tanzania to extend research into digital currencies and improve the capabilities of central bank employees. This was in response to neighboring countries’ efforts to establish CBDCs.
Although CBDCs are being introduced gradually, public interest in digital currencies has sometimes been low. Following a decree from the Bank of Tanzania in November 2019 stating that digital assets were not recognized by local law, cryptocurrencies are generally prohibited in Tanzania.
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