National Bank of Rwanda Explores Potential of Tokenised Retail CBDC

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Key Takeaways

  • As per the findings of the paper, at least 15 CBDC opportunities have been identified.
  • One among the 4 sweet spots identified is increasing resilience against possible power failures, or natural disasters.
  • The paper advises BNR to enable interoperability with existing payment systems and potential other CBDCs.

Countries around the world are becoming increasingly receptive towards central bank digital currency (CBDC). The latest country to join in on the CBDC bandwagon is Rwanda. A recent research report from the National Bank of Rwanda recommends a two-tier, universal, zero-interest CBDC with partial pseudo-anonymity that favours a distributed database model instead of a distributed ledger for increased reliability

As per the findings of the paper, at least 15 CBDC opportunities have been identified. The Central Bank has listed four “sweet spots” for CBDC “based on stronger evidence and higher certainty of achievability than the other opportunities.”

One of the sweet spots is increasing resilience against possible network outages, power failures, or natural disasters. The paper also details how CBDC could help the country achieve a cashless economy status.

“Combined mobile and card-based POS payments account for 27% of total transfers while the rest of the channels account for no more than 3% of cashless payments only, an extremely low percentage reflecting an acute disequilibrium at the cashless payment channels in favour of mobile money”.

The paper states that CBDC could make cross-border remittances cheaper, more transparent, and inclusive. Irrespective of the cashless economy goal, BNR is looking to spend $35 million on printing and maintaining its cash supply in the next five years.

The study which began in 2022, examined the potential benefits, risks, and practicalities involved in implementing a retail CBDC on the local market. The CBDC feasibility study further talks about how the Rwandan CBDC could be designed as a platform open to private payment service providers. It states that this model will not only reduce hurdles to entry for new firms but also enable the CBDC developer community to access the platform and drive innovation.

Rwanda is however not the only African country in recent years to examine the potential of introducing a retail CBDC. Nigeria ever since its launch of CBDC-eNaira in 2021 has been working on boosting its adoption in the country.

The number of eNaira wallets increased over 12-fold between October 2022 and March 2023 to 13 million while the value of transactions surged 63% to $14 million in the first four months of 2023.

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Saniya Raahath
Saniya Raahath

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