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The Central Bank of Eswatini, a small African nation bordered by South Africa and Mozambique, has released a detailed design paper outlining the structure of its potential central bank digital currency (CBDC), the digital lilangeni. This digital currency, designed for retail use, represents Eswatini’s step toward embracing digital financial systems.
Tailored for Eswatini’s Unique Context
According to the design paper, the digital lilangeni will be a tokenized retail CBDC operating on a distributed database rather than a traditional distributed ledger. The CBDC would feature both online hosted wallets managed by financial institutions and hard wallets—likely in the form of smart cards—that can function without internet access. This dual system is aimed at improving access to digital payments, even in areas with limited connectivity.
The Central Bank’s design also highlights a two-tier distribution model where financial institutions will handle currency distribution to users, supported by infrastructure managed by the central bank. Additionally, the CBDC will maintain pseudo-anonymity, ensuring user privacy while complying with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
Notably, the digital lilangeni will feature programmable payments, allowing users to set up automated transactions or restrict spending, for example, to manage children’s allowances.
Addressing Payment Systems and Interoperability
Despite Eswatini’s push for a “cash-lite” society, cash remains the predominant payment method. The central bank phased out checks in 2022, and digital financial services, such as mobile money and bank cards, have gained some traction. To support the nation’s shift towards digital payments, the digital lilangeni will focus on interoperability, functioning seamlessly within Eswatini’s existing electronic money frameworks and adhering to international standards. The currency is pegged to the South African rand, making cross-border compatibility critical.
The Central Bank of Eswatini collaborated with Giesecke+Devrient using their Filia CBDC technology for the digital lilangeni. This initiative has already gone through proof-of-concept trials and both sandbox and live pilot projects. While delays arose due to staff training, scaling up training efforts will be essential for full CBDC implementation.
Global and Regional Comparisons
Eswatini’s CBDC design bears similarities to Rwanda’s digital franc, as both are token-based and operate on distributed databases rather than blockchain, which is seen as more reliable for their specific needs. The programmable nature of these digital currencies, though viewed skeptically in more developed economies, is gaining traction in countries like Kazakhstan, where it is seen as a tool to combat corruption.
As Eswatini moves forward with its digital lilangeni, it continues to push the boundaries of digital financial inclusion, ensuring that the nation’s payment systems keep pace with technological advancements while addressing the needs of its population.
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