The National Bank of Rwanda (BNR) is undertaking a thorough feasibility study to implement a central bank digital currency (CBDC) based on local practices and culture.
The study, released on Wednesday, seeks to investigate the integration of modern technologies in Rwanda’s financial system and provide an analysis of how CBDC could improve the country’s monetary policy framework.
The BNR report points out four main benefits that a CBDC could deliver to the payment sector in Rwanda. These include improved robustness against power or network service disruptions, competition and innovation with other digital currencies, support for Rwanda’s move to a cashless economy, and better quality, cheaper, and more transparent international remittance processes.
Challenges in Implementing CBDC
Despite the advantages, the BNR report also highlights several challenges that must be addressed for a successful CBDC deployment. Major issues, however, are related to the rate of adoption from consumers, providers, and merchants. The report emphasizes the role of transparent and accurate communication in achieving the understanding and approval of all stakeholders of the CBDC.
Furthermore, the report offers technical solutions to some of these issues. The preferred CBDC model is token-based, enabling transactions to be executed offline through Bluetooth or Near Field Communication (NFC) technologies. This will allow the CBDC to retain its usage when the internet is down or in locations with poor networks, hence maintaining, if not providing, more accessibility and reliability than the normal banking systems.
Strategies for User Experience and Market Position
The central bank also recommends that the CBDC design provide a user-friendly and seamless experience, fusing the advantages of both private and public currency systems. This strategy focuses on viewing the CBDC as a valuable complement to the financial system rather than a competitor to conventional financial institutions and e-money platforms.
Rwanda enters the feasibility study stage as it contemplates incorporating a CBDC into its economy. Through a deep analysis of both the opportunities and the threats, BNR is formulating a digital currency strategy that could revolutionize transactions in Rwanda’s financial industry.
Many countries are exploring CBDC’s potential. Last month, Cryptomode reported that Pakistan is taking a crucial step towards implementing CBDC into its financial system. Also, New Zealand developed a four-stage plan for the CBDC’s launch before the end of 2024.
