Tanzania Takes Tentative Steps to CBDC Adoption

The Bank of Tanzania is cautiously readying a central bank digital currency (CBDC).

The country’s central bank said it will “continue to monitor, research and collaborate with stakeholders, including other central banks, in the efforts to arrive at a suitable and appropriate use and technology for issuance of Tanzanian shillings in digital form,” according to a Saturday (January 14, 2022) news release.

However, the bank, which first announced its digital currency project in May of last year, said it was taking a “phased, cautious and risk-based approach” to introducing a CBDC as it studies the challenges associated with adoption.

Among those challenges are inefficient payment systems, high implementation costs, the risk of disrupting the country’s financial system, and the popularity of cash transactions.

The bank said its research into other country’s CBDC adoption shows that a “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.”

Even with this slower approach to rolling out CBDCs, digital currencies haven’t always drawn enthusiasm from consumers.

For example, comments from a former official at the People’s Bank of China, Xie Ping, who said he was disappointed with the results of that country’s test of its digital yuan.

“The cumulative circulation of the digital yuan in the two years of the trial has been only 100 billion yuan ($14 billion),” Xie told a conference at Tsinghua University. The number suggests that “usage has been low, highly inactive.”

“The results are not ideal,” Xie, a former director-general of research for the bank, said. “What needs to change is the digital yuan acting only as a substitute for cash and only for consumption.”

Across the pond, the Bank of England’s digital pound project hasn’t gotten much support from the U.K. parliament. The cross-party Lords Economic Affairs Committee has referred to CBDCs in a recent report as “a solution in search of a problem.”

Nigeria’s central bank has had a CBDC since 2021 but was moved to chastise the country’s banks last year for their “apathy” in promoting the coin to the nation’s 200 million citizens.

By October of last year, 1 million people had downloaded the digital wallet associated with the CBDC, with users making about 700,000 transactions worth $18.3 million.

300,000 more wallets had been downloaded than had actually been used.