The National Bank of Ethiopia (NBE) has drafted two proclamations as part of a comprehensive economic reform strategy. One of these proclamations focuses on establishing a legal framework for the introduction of a central bank digital currency (CBDC).
The proposed changes outlined in the NBE Proclamation include the development of a legal framework for a CBDC “as needed,” along with an increase in the NBE’s capital and the establishment of a legal foundation for consumer protection. The accompanying Banking Business Proclamation addresses the liberalization of foreign investment in the banking sector, measures to address issues with “problem” banks, and the establishment of a regulatory sandbox for innovative financial solutions.
The Council of Ministers has given their approval to these proclamations, which are set to be introduced to the House of Representatives in the near future.
The central bank has ambitious reforms in store as part of the government’s Homegrown Economic Reform Agenda. The Reporter, a privately owned Ethiopian newspaper, previously mentioned the government’s interest in a CBDC back in April, noting that a study would be initiated in June. Additionally, the NBE aims to join “the Cross Border Payment System” by December, although specific details about this system have not been disclosed.
In other news, Ethiopia has taken steps towards economic liberalization, including the end of the state monopoly on mobile money services. The country has already implemented blockchain-based digital infrastructure for significant government transactions.
Africa’s experience with cryptocurrency has been varied, with some countries making strides in adoption despite challenges such as limited internet access. The Central African Republic, for example, adopted Bitcoin as a currency and introduced a non-CBDC government cryptocurrency called the Sango with limited success. However, the Sango currency website is currently non-functional.
While digital currencies are currently prohibited in Ethiopia, numerous data mining firms have obtained licenses to capitalize on the country’s low-cost electricity for crypto mining operations. Plans are also underway to introduce the Web3 Fuse payment system in the country.
Approximately 18 African nations are exploring the potential of CBDCs, with Nigeria launching the eNaira in 2022 as the world’s second live CBDC with mixed results. Zimbabwe, on the other hand, utilized a government-issued gold-based token as the basis for introducing its latest currency.
In a separate development, Cape Town in South Africa has emerged as a digital-nomad crypto hub, as detailed in the Crypto City Guide magazine.