After months of investigation, the central bank of Tanzania recently announced that it had chosen a more cautious, risk-based approach to the adoption of its central bank digital currency (CBDC). During the investigation phase, the central bank said it paid special attention “to the risks and controls associated with the issuance, distribution, counterfeiting and use of coins.”
Finding the Right CBDC Technology
The Bank of Tanzania (BOT) announced on Jan. 14 that it had “adopted a gradual, cautious and risk-based approach to CBDC (central bank digital currency) adoption.” The bank also said it will continue its efforts to find “a suitable and appropriate use and technology for the issuance of Tanzanian shillings in digital format.”
according to a declaration On the bank’s website, the BOT said it chose a more cautious approach after spending months researching and exploring the pros and cons of issuing the digital currency. During this period, the BOT said it found that other central banks had taken the same stance, while six countries had chosen to cancel their CBDC adoption “mainly due to structural and technological challenges in the implementation phase.”
As Bitcoin.com News reported in May 2022, the Tanzanian central bank said it planned to launch its CBDC because it had become a trend among central banks. Furthermore, the bank said that the digital currency would be “a safe(r) alternative because many people are affected by cryptocurrency speculators.”
However, fears that the CBDC could disrupt the country’s financial system eventually forced the BOT, which indicated it was set to launch in the first half of 2022, to take a more conservative approach.
Risks Associated with CBDCs
Meanwhile, during the research phase, the Tanzanian central bank revealed that it considered the type of CBDC to be issued, the issuance models, the form of the digital currency, as well as the “degree of anonymity or traceability.” The statement also suggested that the bank had paid more attention to the associated risks.
“Special attention is also paid to the risks and controls associated with the issuance, distribution, counterfeiting and use of coins,” the central bank said.
In the statement, the BOT said that once the investigation is complete, the Tanzanian public will be provided with information on the way forward and this will likely include a roadmap for the “transition to CBDC adoption.”
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