Ethiopia is on its way to transforming its economy by reportedly planning to issue a Central Bank Digital Currency (CBDC). This is part of the government’s economic liberalization measures aimed at improving financial development and sustainability in the country.
The National Bank of Ethiopia (NBE) has recently developed two strategic proclamations that are the cornerstones of its reform program. The first declaration is concerned with legal requirements for the issuance of a CBDC, which covers all the legal aspects that may be required to support the issuance of the CBDC. This framework is expected to provide a good framework for the digital currency in as much as it will conform with international standards and consumer protection.
Secondly, the second proclamation which is the Banking Business Proclamation has the objective of liberalizing foreign investment in the banking business. It also contains provisions for handling non-compliant or ‘troublesome’ banks as well as the establishment of a regulatory sandbox to foster new and innovative financial products. It is a kind of testing ground to experiment with new financial technologies and to reduce risks at the same time for the purpose of innovation.
These proclamations have already received the approval of the Council of Ministers, and they are to be presented to the House of Representatives shortly. These are in the Ethiopia Homegrown Economic Reform Agenda which is a plan to restructure the economy of the country through reforms.
The NBE has been leading the charge toward a CBDC, first signaled its intent in April with the announcement of a study to begin in June. Further, Ethiopia is planning to become a member of the Cross Border Payment System by December without much information about this system. The country is also gradually opening up for economic liberalization, for example, it has withdrawn from the state monopoly in mobile money services and uses blockchain technology for large government payments.
Despite the fact that Ethiopia is on the right track regarding the implementation of these economic reforms, the process is not without some hitches. Generally, the use of digital currencies in Africa has been a rollercoaster ride for some countries. For example, the Central African Republic has tried to adopt Bitcoin and its Sango cryptocurrency without much success. On the other hand, Nigeria’s e-Naira which was launched in 2022 has received mixed reactions.
As for digital currencies, they are prohibited in Ethiopia at the moment; however, the country has been rather active in licensing data mining companies to harness the cheap electricity in the country for crypto mining. Furthermore, there are plans to integrate the Web3 Fuse payment system. Given that at least 18 African countries are considering CBDCs, Ethiopia’s actions may create a trend for digital currency implementation across the continent, which can positively transform the region’s financial sphere.
Also Read: Explore New Horizons With Coinbase Pre-Launch Crypto Futures
