Mobile money is a type of digital currency that has become very popular in Africa. However, many central bankers on the continent believe that a different type of digital currency called CBDC (central bank digital currency) is a better option. African central bankers think that CBDC would be more useful for implementing monetary policy than bankers in other parts of the world, according to the BIS.
Nineteen African banks said they have shown interest in creating their own digital currency, according to a new report. So far, only Nigeria has issued a retail CBDC (eNaira) for public use. Ghana has a retail CBDC project in the pilot stage, and South Africa is currently running a project for a wholesale CBDC, which is meant for use by institutional investors.
The main reason that African central bankers want to introduce a new digital currency is so that people will be able to use it to buy things more easily. A CBDC would be cheaper to produce than traditional banknotes and coins, and would also be easier to transport and store. All of the respondents said that financial inclusion is important. This means that everyone should have access to financial services, like banking and insurance. In 2021, less than half of all adults in Africa had a bank account.
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Most of the world’s money transfers happen in Sub-Saharan Africa, and more than half of all people who use money transfers are from there. The report notes that the entry of CBDC into this field could improve competition and lower costs. A CBDC is a digital currency that can be used for buying things or services online. You can use it to make regular payments, like bills or rent.
Implementing CBDC is very hard task:
Some central bankers are worrying that adopting this policy could make it easier for cyber criminals to attack the financial system, and that not enough people would use it to make it effective. Bankers are worrying that central banks will stop using them to help carry out monetary policy. The cost of sending money to other countries was a big concern when designing this system.
