As more people travel across Africa for play and work, central banks in Sub-Saharan Africa are seriously considering the use of central bank digital currencies (CBDCs) to boost cross-border payment systems.
Several African central banks, hosted by the Central Bank of Kenya last week, discussed challenges facing the markets and the Financial Stability Board’s plans for 2023 among other issues.
Digital currencies, money laundering, and financial terrorism featured heavily in the discussions. As more people go cashless, African countries are exploring ways to regulate these currencies and transactions.
Digital currencies are coming
“The group discussed initiatives to enhance cross-border payments in the region, including the potential use of central bank digital currencies for cross-border payments while noting the importance of compliance with anti-money laundering and combating the financing of terrorism (AML-CFT) standards,” said the Financial Stability Board (FSB) Regional Consultative Group for Sub-Saharan Africa in a statement.
The SARB has been trying to find ways to regulate a digital Rand for a while. Earlier this year, the Bank announced that it was testing ledger technology which is mostly used by blockchain-based currencies. The technology was being used to track transactions in real-time while supplying increased transparency.
The SARB’s project Khoka 2 explored the use of tokens, digital currencies, and blockchain in the country.
In July this year, the SARB became part of Project Dunbar, another attempt at digital currencies in collaboration with the Reserve Bank of Australia, the monetary authority of Singapore, and the Central Bank of Malaysia.
At the time, the SARB said CBCDs would most likely be used for cross-border services, goods, or remittances. It also said it would be several years before it becomes a reality.
Nigeria’s eNaira was launched this year following the country’s CBDC pilot in 2021 and in the same year, Ghana announced its eCedi pilot while Kenya kicked off its public consultation this year.
Decades on, Africa continues with talks about a continental central bank, but it seems a digital currency might just be the thing to get everyone on the same page.