Central bank digital currencies in Africa
The Bank for International Settlements (BIS) published a paper that analyses the development, motivations and concerns of central bank digital currencies (CBDCs) in Africa. While all of those surveyed are analyzing CBDCs, only few have projects at advanced stages (pilot or live). Some countries, in particular in East and West Africa, stand out as promoting fast payment systems through mobile money, but half of the surveyed central banks think that CBDCs can provide a superior solution. A key motivation for African central banks is achieving greater payment system efficiency. In addition, a higher proportion than in other regions see potential benefits for monetary policy, an important consideration for a region where the transmission mechanism is weak. Central banks in Africa also place more emphasis on financial inclusion. At the same time, they are more worried than other regions about cyber security risks and cross-border spillovers and are also concerned about high operational burdens... And speaking of high operational burdens, only just over 40% of respondents favored a two-tier business model, with the central bank at the core, but private agents (banks and payment service providers) interacting with users (e.g., performing customer onboarding, including KYC/AML functions). Almost all central bank CBDC explorers I follow have dismissed the direct model in which the central bank does all of the "donkey work". However, it should be noted that almost all of the other 60% or so of respondents were simply undecided about the business model at this point. The preference for a two-tier model is strongest among central banks for which financial disintermediation is a top concern. Bringing banks – and other PSPs – on board would encourage them to accept CBDCs. A two-tier model would facilitate collaboration and potentially draw on synergies with the private sector.
