The East African Community (EAC) States have began exploring the possibility of using central bank digital currencies (CBDC) as an alternative to their shared payment system.
The revelations of the EAC’s digital currency plan follow the bloc secretariat’s “consultancy call for a feasibility study” to upgrade the struggling East African Payment System (EAPS), which was launched in May, 2014. The move for a CBDC is expected to end the distrust by member countries to trade in each other’s currency.
According to a report, EAC says
“the selected consultant will conduct an exploratory scoping for emerging technologies and their adoption, including technologies involving the use of Central Bank Digital Currencies (CBDCs).”
Speaking concerning the struggling EAPS, EAC Secretariat detailed some of the key challenges that have been observed with the EAPS, stating that “The original funding model where participants sourced for funding of other EAC currencies from the market is proving expensive due to unavailability of partner States’ currencies in the local market.”
The Secretariat thereafter adds that “The fact the system does not operate on a single platform also means that centralised liquidity and collateral management is not possible, and this in turn impact negatively on the operations of the system.”
Meanwhile, EAC is an intergovernmental organisation comprising of six countries in the Eastern part of Africa, which include Kenya, Rwanda, Burundi, South Sudan, Uganda and Tanzania.
However, it is worthy to note that Kenya dominates transactions in the EAPS, which allows citizens of member countries to make and receive payments in regional currencies.