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Tuesday, May 30, 2023

Tanzanian Central Bank Adopts ‘Phased and Risk-Based Approach to Adoption of CBDC’

Tanzanian Central Bank Adopts ‘Phased and Risk-Based Approach to Adoption of CBDC’ – The Bank of Tanzania (BOT) announced on Jan. 14 that it had “adopted a phased, cautious and risk-based approach to adoption of CBDC (central bank digital currency).” The bank also said it will continue with its efforts aimed at finding “a suitable and appropriate use and technology for issuance of Tanzanian shillings in digital form.”

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The BOT stated on its website that it decided to take a more cautious approach to issuing a digital currency after conducting extensive research and weighing the benefits and drawbacks. It noted that other central banks had also adopted a similar stance, and that six countries had abandoned plans to adopt a CBDC due to difficulties in implementation.

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However, as reported by a news outlets in May 2022, the Tanzanian central bank said it planned to launch its CBDC because this had become a trend among central banks. In addition, the bank said the digital currency would be “a safer alternative because many people are being affected by cryptocurrency speculators.”

Due to concerns that the CBDC would have negative impacts on the country’s financial system, the BOT, who had previously signaled its intention to launch in early 2022, decided to take a more measured approach. Meanwhile, during the research phase, the Tanzanian central bank revealed that it considered the type of CBDC to be issued, the models for issuance, the form of the digital currency, as well as the “degree of anonymity or traceability.” 

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The statement also suggested the bank had given more attention to associated risks. “Particular attention also is paid to risks and controls associated with issuance, distribution, counterfeit and usage of currencies,” the central bank said. In the statement, the BOT said once the research is complete, the Tanzanian public will be given information on the way forward and this will likely include a roadmap for the transition to CBDC adoption.


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