Many African countries are looking at adopting digital currencies for central banks (CDBCs) due to the possibility of a more efficient financial system than Bitcoins and other cryptocurrency. Uganda is the latest African nation to embark on a journey towards establishing its own CDBC.
According to reports, the Ugandan central bank (BOU), has begun looking at the possibility of issuing a CBDC that can be used by both individuals and businesses. Furthermore, the BOU is rumored to be revising the country’s financial legislation. The BOU can legally adopt the CBDC.
According to a report, advocates of CBDCs support the central bank’s stance, claiming that such a digital currency will allow Ugandans to move money more cheaply and quickly.
Nonetheless, Charles Abuka, the bank’s executive director of operations, said in a new interview that the BOU must be precise about why it wants to launch the CBDC in the first place. The first step in determining the reason for the CBDC’s existence, its purpose, and the difficulties it will help Uganda overcome is the most important.
Abuka believes that CBDC’s issuance will have significant technological implications. According to him, the technology architecture of such a digital currency will come at a price, and the central bank must comprehend the charges’ ramifications. He also discussed the possibility that cyber-attacks could be made on digital currencies.
Notwithstanding the BOU’s reservations, Noah Baalessanv, a blockchain expert and one of Uganda’s digital currency supporters, believes that a CBDC will help the central bank to obtain a feel of the actual economy.
Baalessanv said that unlike a cash-based economy, which is equally costly to run and transparent to the public, a CBDC allows a central bank to track transactions.
The blockchain analyst warned that issuing a CBDC could result in financial institutions being excluded from the banking system.
While releasing digital currency directly to users is more effective, Baalessanv believes it is also the CBDC’s most harmful feature.
Many countries around the globe are now exploring the economic benefits of CBCDs.
Nigeria and South Africa have already developed it, and countries such as Ghana, Tunisia, Rwanda, Morocco, Egypt, and Kenya are investigating the technology’s viability. Financial inclusion is one of the major focal points of Nigeria’s eNaira.