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After months of research, the Tanzanian central bank recently announced that it has chosen a more cautious and risk-based approach to the adoption of its central bank digital currency (CBDC). During the research phase, the central bank said it paid particular attention “to the risks and controls associated with the issuance, distribution, counterfeiting and use of currencies.”

Finding the Right CBDC Technology

The Bank of Tanzania (BOT) announced on January 14 that it had “adopted a gradual, cautious and risk-based approach to CBDC adoption. [central bank digital currency].” The bank also said it will continue its efforts to find “appropriate and appropriate use and technology for issuing Tanzanian shillings in digital form.”

According to a statement On the bank’s website, the BOT said it chose a more cautious approach after spending months researching and exploring the pros and cons of issuing digital currency. During this period, the BOT said it found that other central banks had adopted the same posture, while six countries had chosen to reverse their adoption of the CBDC “mainly due to structural and technological challenges in the phase of implementation”.

As reported by News in May 2022, the Tanzanian central bank said that it plans to launch its CBDC as it has become a trend among central banks. Additionally, the bank said the digital currency would be “a safe[r] alternative as many people are affected by cryptocurrency speculators.

However, fears that the CBDC could disrupt the country’s financial system eventually forced the BOT, which signaled it was ready to launch in the first half of 2022, to adopt a more conservative approach.

Risks associated with CBDCs

Meanwhile, during the research phase, the Tanzanian central bank revealed that it considers the type of CBDC to be issued, the issuance models, the form of the digital currency, as well as the “degree of anonymity or of traceability”. The statement also suggested that the bank had paid more attention to the associated risks.

“Special attention is also given to the risks and controls associated with the issuance, distribution, counterfeiting and use of currencies,” the central bank said.

In the statement, the BOT said that once the research is complete, the Tanzanian public will receive information on the way forward, which will likely include a roadmap for “transitioning to CBDC adoption.”

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Terence Zimwara

Terence Zimwara is an award-winning journalist, author and writer in Zimbabwe. He has written extensively on the economic issues of some African countries as well as how digital currencies can provide an escape route for Africans.

Image credits: Shutterstock, Pixabay, Wiki Commons

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