The National Bank of Ethiopia (NBE) has announced plans to create a legal framework for a central bank digital currency (CBDC). This move comes as part of broader economic reforms. The NBE’s new proclamations also aim to increase the bank’s capital and strengthen consumer protection laws.
The NBE Proclamation includes a regulatory sandbox for innovative financial solutions and foreign investment liberalization. The Council of Ministers has approved these measures, which will soon be discussed in the House of Representatives.
Ethiopia’s Economic Liberalization Efforts
Ethiopia’s government has embarked on significant economic liberalization. The country ended its state monopoly on mobile money services. Additionally, blockchain-based digital infrastructure supports large government payments.
The Reporter, a local newspaper, indicated that Ethiopia plans to study the potential for a CBDC starting in June. The NBE also aims to join the Cross Border Payment System by December, though details remain sparse.
Crypto Adoption in Africa: A Mixed Bag
Africa has seen varying degrees of success with cryptocurrency adoption. Despite challenges like low internet penetration, several countries are making progress. The Central African Republic’s adoption of Bitcoin as a currency and the Sango cryptocurrency saw limited success. At the time of writing, the Sango currency website is inactive.
In Ethiopia, digital currencies remain illegal, yet numerous data mining firms operate due to the country’s low electricity costs. Ethiopia also plans to introduce the Web3 Fuse payment system.
CBDC Research Across Africa
Across Africa, 18 countries are researching CBDCs. Nigeria launched the eNaira in 2022, with mixed results. Zimbabwe introduced a gold-backed digital token as a new currency.
These efforts indicate a growing interest in digital currencies. They also highlight the challenges and opportunities presented by such initiatives.
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