Rwanda is Not Falling Behind: Working on its CBDC

Published on June 6, 2024
By: Indigo White
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Soraya Hakuziyaremye, Deputy Governor of Rwanda’s National Bank, revealed that the institution is developing a central bank digital currency (CBDC). This move aims to keep Rwanda competitive and remove trade barriers with its business partners. Click here for more information.

CBDCs are the traditional banking sector’s response to cryptocurrencies. These centralized digital assets are tied to a country’s fiat currency. According to Atlantic Council researchers, 134 countries are currently developing CBDCs, but only 3 have launched projects available to the public: the Bahamas, Jamaica, and Nigeria. In contrast, Ecuador and Senegal have decided to cancel their initiatives.

In a recent interview, the BNR Deputy Governor revealed that in 2022, serious discussions began about initiating a Rwandan CBDC. To enable this, a collaboration was initiated with two key ministries: Finance and Technology, leading to the creation of a working group. This group started exploring CBDC initiatives undertaken in other regions. According to Hakuziyaremenye, the absence of a Rwandan CBDC could present challenges for the country’s private sector, requiring the country to develop its solution and prepare to engage with CBDCs from other nations.

“There is also an imperative for the Central Bank to make sure that we are ready for innovations that are also experimented in other countries where we have trading relations and partnership so that we are not at the tail end of that of such developments”.

While Hakuziyaremenye recognizes the optimism surrounding Rwanda’s CBDC development, she also notes concerns raised by many users regarding privacy and security. The deputy governor doesn’t shy away from acknowledging potential risks uncovered by the BNR’s investigations, including the possibility of a low adoption rate. However, she also emphasizes the institution’s commitment to addressing these concerns. Once the consultation and discussion phase concludes, the central bank will initiate a proof of concept involving ordinary citizens and numerous companies.

The interviewee stresses a cautious approach and highlights the importance of working closely with trading partners to enhance the efficiency and affordability of cross-border payments. The institution is considering a retail CBDC development and has even explored the feasibility of an offline-accessible project, which would be particularly useful in areas with limited internet access or during power outages.

“The CBDC would encourage innovation and competition among payment service providers, ultimately leading to a future where fewer citizens rely on cash.

However, launching a CBDC is a serious endeavor that requires careful consideration. We must conduct small-scale tests to evaluate the technology, design, and speed, as well as address cross-border payment challenges. Rwanda prefers a retail CBDC, distributed through banks similar to traditional deposits and accounts.

To claim there are no risks would be misleading. Our research suggests challenges regarding system stability, cybersecurity, and public adoption”.

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