Eswatini, one of Africa’s smallest nations, has published a paper outlining the design principles of its upcoming retail central bank digital currency (CBDC). Known as the digital lilangeni, the CBDC will focus on offline capabilities, interoperability with existing payment methods, and cross-border transfers.
The Central Bank of the Kingdom of Eswatini has been exploring the CBDC for years in partnership with the German technology firm Giesecke+Devrient (G+D). Through a successful proof-of-concept (PoC) and two pilot projects, they have experimented with design and implementation tweaks, resulting in a version they believe will best serve the 1.2 million Swazi.
In the paper co-published with G+D, the bank highlighted that the provision of secure access to central bank money and fostering payments digitalization are key motivations for exploring the CBDC. Boosting financial inclusion and creating new opportunities were also noted as significant benefits.
Accessibility is one of the central bank’s primary goals with the digital lilangeni, prompting the embedding of offline payments into the CBDC. However, this feature will be available only to residents using hardware wallets that aren’t provided by financial institutions. Hosted wallets, which will come with value-added services from banks and payment providers, will be accessible only online. Eswatini
To further enhance accessibility, the bank plans to make the functional design simple and user-friendly for all Swazi.
“From a consumer perspective, the usage of Digital Lilangeni needs to be as easy and intuitive as possible. Consumers should be able to make a payment in fewer and simple steps familiar to them and with no need for advanced digital literacy,” it stated.
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The paper indicates that most other aspects of the digital lilangeni conform to global CBDC standards. These include pseudo-anonymity that balances privacy and compliance, allowing exemptions for Know Your Customer (KYC) and anti-money laundering (AML) regulations for smaller transactions. It also involves no interest payments and a holding cap (not yet set) to prevent commercial bank disintermediation.
Similar to many of its counterparts, the Eswatini central bank opted for a distributed and permissioned database, wherein it retains control, as opposed to distributed ledger technologies like blockchain.
Despite the comprehensive design recommendations, the bank clarified that it has not yet made the decision to issue a CBDC. This is a common caveat that central banks attach to CBDC research to signify that while the technological aspects have progressed, a digital currency also requires legislative groundwork to be laid before central banks can proceed.
In the United States, Jerome Powell stated earlier this year that the U.S. Fed is “nowhere near recommending, let alone adopting” a digital dollar, despite its ongoing research and PoCs. Similarly, the Bank of England (BoE) reiterated this sentiment, informing legislators that “no final decision has been made” on a digital pound. Eswatini CBDC
