The National Bank of Ethiopia (NBE) has prepared two proclamations as part of an economic reform plan. One of them includes the establishment of a legal framework for introducing a central bank digital currency (CBDC).
The policy changes foreseen by the NBE Proclamation include creating a legal framework for a CBDC “as necessary,” as well as increasing the NBE’s capital and creating a legal basis for consumer protection. The accompanying Banking Business Proclamation addresses liberalization of foreign investment in banking, corrective measures regarding “problem” banks and the creation of a regulatory sandbox for innovative financial solutions.
The Council of Ministers has approved the proclamations and will soon be introduced into the House of Representatives. Ethiopia CBDC
The central bank has broad reforms in mind!
The proclamations are part of the government’s Homegrown Economic Reform Agenda. The privately owned Ethiopian newspaper The Reporter mentioned the government’s interest in a CBDC in April. It said a study would be launched in June. It added that the NBE also aims to join “the Cross Border Payment System” by December. It did not provide any specifics about that system.
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Ethiopia has already taken steps toward economic liberalization, including ending the state monopoly on mobile money services. The country already uses blockchain-based digital infrastructure for large government payments.
Crypto adoption is making headway in several African countries, despite barriers such as low internet penetration. Not all attempts to introduce crypto have been successful. Notably, the Central African Republic adopted Bitcoin as a currency and launched a non-CBDC government cryptocurrency called the Sango with limited success. The Sango currency website is not functional at the time of writing.
Digital currencies remain illegal in Ethiopia, although the licensing of “dozens” of data mining firms have sought to take advantage of the country’s cheap electricity to mine crypto. Plans were also in place to introduce the Web3 Fuse payment system there.
At least 18 African countries are researching CBDCs. Nigeria has had mixed luck with the eNaira, launched in 2022 as the world’s second live CBDC. Zimbabwe used a government-issued gold-based token as the foundation for the introduction of the latest currency. Ethiopia CBDC
