The National Bank of Ethiopia (NBE) is introducing two significant proclamations as part of the country’s economic reform plan. One of these proclamations involves setting up a legal framework to introduce a central bank digital currency (CBDC).
Key Changes in the NBE Proclamation
The NBE Proclamation includes several policy changes:
– Establishing a legal framework for a CBDC.
– Increasing the NBE’s capital.
– Creating legal protections for consumers.
Additionally, the Banking Business Proclamation aims to:
– Liberalize foreign investment in banking.
– Implement corrective measures for “problem” banks.
– Create a regulatory sandbox for innovative financial solutions.
The Ethiopian Council of Ministers has approved these proclamations, and they will soon be presented to the House of Representatives for further consideration.
NBE Part of a Broader Economic Reform Agenda
These proclamations are part of Ethiopia’s Homegrown Economic Reform Agenda. The Reporter, a private Ethiopian newspaper, highlighted the government’s interest in a CBDC back in April, mentioning that a study would begin in June. The NBE also plans to join a “Cross Border Payment System” by December, though details about this system remain scarce.
Ethiopia has already taken steps towards economic liberalization by ending the state monopoly on mobile money services. The country also uses blockchain technology for large government payments.
Crypto Adoption in Africa
Crypto adoption is progressing in various African countries despite challenges like low internet access. However, not all efforts have been successful. For instance, the Central African Republic adopted Bitcoin as a currency and launched a non-CBDC cryptocurrency called the Sango, which has seen limited success. Currently, the Sango currency website is non-functional.
Digital currencies are still illegal in Ethiopia. Despite this, many data mining firms have been licensed to take advantage of the country’s cheap electricity to mine crypto. There are also plans to introduce the Web3 Fuse payment system.
At least 18 African countries are exploring CBDCs. Nigeria launched the eNaira in 2022, which has had mixed results. Zimbabwe introduced a government-issued gold-based token as its latest currency.
Ethiopia’s move towards a CBDC and broader economic reforms indicate the country’s commitment to modernizing its financial system and integrating more advanced financial technologies.
