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The Ethiopian Council of Ministers has recently approved a draft proclamation, setting the stage for the introduction of a central bank digital currency (CBDC). The National Bank of Ethiopia (NBE) emphasized that the draft leverages rapid technological advancements and insights from other central banks’ experiences.
Proclamation Empowers Ethiopian Central Bank to Launch CBDC
The Council of Ministers’ approval marks a significant milestone in Ethiopia’s journey towards launching a CBDC, establishing a legal framework that permits the digital currency to circulate alongside the traditional fiat currency.
According to local reports, the proclamation authorizes the NBE to initiate the digital currency whenever it is deemed necessary. The NBE highlighted that the draft was crafted by considering the nation’s current and future developmental needs, policy directions, technological advancements, and international best practices from other central banks.
“The National Bank of Ethiopia, NBE, has prepared these proclamations, taking into account the current and future levels of development and policy direction, as well as rapid technological advancements, international principles, and best practices and experiences of peer central banks,” the central bank stated.
Additionally, the Ethiopian Central Bank aims to introduce the CBDC as part of broader reform measures.
Opening the Local Banking Sector to Foreign Competition
While the NBE aligns itself with other central banks exploring or implementing CBDCs, Ethiopia’s monetary authorities have historically discouraged the use of cryptocurrencies. For example, a report by Bitcoin.com News in June 2022 highlighted the NBE’s warning against using cryptocurrency for transactions, reaffirming that the Ethiopian birr remains the only legal tender.
Besides the CBDC proclamation, the Council of Ministers has also approved opening the local banking sector to foreign competition. Following this approval, both proclamations will be forwarded to the legislature for review and final ratification.
This strategic move not only positions Ethiopia at the forefront of digital financial innovation but also signifies a substantial shift in its economic and regulatory landscape, potentially enhancing financial inclusion and modernizing the country’s financial system.
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