The Bank of Tanzania will introduce a CBDC in a phased and cautious approach to promote financial inclusion and enhance payment systems efficiency.
The Bank of Tanzania (BoT) announced its plan to introduce a central bank digital currency (CBDC) in the country, but with a phased and cautious approach.
Since the announcement of rolling out a CBDC in 2021, the Bank officially announced the forming of a multidisciplinary technical team. The team will work to explore the risks and benefits of CBDCs.
The central bank stated that the move is aimed at promoting financial inclusion and enhancing the efficiency of the country’s payment systems.
Understanding the CBDC landscape
The BoT emphasized taking a thorough and rigorous approach to understanding the CBDC landscape before making any concrete decisions.
This includes conducting vigorous research. Other approaches the bank committed itself include to engaging with other central banks and stakeholders to gain a deeper understanding of the potential benefits. The East African bank will also factor in the risks associated with implementing a CBDC.
In a statement, the bank noted that more than 100 countries worldwide are at different stages of the CBDC adoption journey. Out of these, 88 are at the research, 20 at proof-of-concept, 13 at the pilot, and 3 at the launch stage.
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Taking into account the potential impact on the financial system
The BoT stated that it considers the potential impact a CBDC could have on the country’s financial system. The central bank also stressed the importance of ensuring that the implementation of its CBDC is in line with the country’s existing legal and regulatory framework.
The bank gave the assurance of taking a measured and deliberate approach to the introduction of the digital currency. This includes assessing the potential impact on monetary policy, financial stability, and the overall functioning of the country’s payment systems. By doing so the bank will ensure that it does not disrupt the existing financial system.
“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 noted.
Tanzania outwardly banned cryptocurrencies following a directive from the central bank in November 2021. The bank claimed that the digital assets were not recognized by local law.
