A recent study by the Bank for International Settlements has observed that Central Banks are motivated to develop a digital currency, to allow for improved payment system efficiency.
The Bank for International Settlements (BIS) in a report published on Thursday observed that Central Banks in Africa have differing motives for developing a Central Bank Digital Currency (CBDC).
The report drew the analysis from 19 African Central Banks that responded to its survey.
“Like their peers, a key motivation for African central banks is achieving greater payment system efficiency. In addition, a higher proportion than in other regions sees potential benefits for monetary policy, an important consideration for a region where the transmission mechanism is weak.
The study also observed that the quest for financial inclusion motivates the issuance of a CBDC in Africa.
This also motivates them the provision of cash in digital form and the promotion of financial inclusion (Graph 1.A).
“Other key considerations include improving the effectiveness of monetary policy, increasing competition, and reducing distribution costs of money. These motivations are not mutually exclusive.
“As in other regions, in Africa central bank engagement with CBDCs has increased.
Overall, however, Africa has not proceeded as far as the rest, with fewer projects at advanced stages (pilot or live). Some countries, in particular in East and West Africa, stand out as promoting FPS through mobile money, but half of the central banks think that CBDCs would provide a superior solution.
“Central banks in Africa also place more emphasis on financial inclusion. These factors could foster CBDC issuance and favor adoption. At the same
time, they are more worried than AEs about cyber security risks and cross-border spillovers and are also concerned about high operational burdens. These factors and others, such as the high degree of informality that may hinder adoption, favor a cautious approach.