A look into the future, as RBZ explore digital curreny

A look into the future, as RBZ explore digital curreny

Nevanji Munyaradzi Chiondegwa

Zimbabwe could be the next African country after Nigeria to launch a digital payment solution following calls by the Reserve Bank of Zimbabwe for a Consumer Survey on Central Bank Digital Currency, whose purpose is to solicit opinions on the design and nature of the CBDC and its overall acceptance by the public.

Central Bank Digital Currencies(CBDCs) are a digital representation of central bank-issued money that can be built on a blockchain or distributed ledger.

They are also described as digital tokens, similar to cryptocurrency, issued and regulated by the nation’s monetary authority or central bank.

They are pegged to the value of that country’s fiat currency.

Blockchain technology is an advanced mechanism that allos transparent information sharing within a business network.

A blokchain database stores data in blocks that are linked together in a chain. A cryptocurrency is a digital currency which is an alternative form of payment created using encryption algorithms or a computers.

Because of encryption technologies, they function both as a currency and as a virtual accounting system and one needs a cryptocurrency wallet to use them.

In its invitation to stakeholders, The RBZ said, “The Reserve Bank of Zimbabwe (the Bank) is exploring the possibility of introducing a Central Bank Digital Currency (CBDC) in line with global trends. Accordingly, the Bank is conducting a CBDC Consumer Survey to solicit opinions on the design and nature of the CBDC and its overall acceptance by the public.

You are therefore invited to participate in the survey. Please note that the information you are going to provide will be treated with the utmost confidentiality and the results will only be used for purposes of research on the design, nature and acceptability of CBDC in Zimbabwe.”

China was the first country to embark on a CBDC project in 2014 which they rolled out in 2020. Sweden was first out of the blocks in releasing the e-krona due to the declining use of cash in retail payments.

Canada, The Marshall Islands, The Bahamas and The European Union are among those that have launched or were preparing to launch a CBDC.

CBDCs promote financial inclusion and simplify the implementation of monetary and fiscal policy and since they are issued by the authorities, may not anonymize transactions as some cryptocurrencies do. The difference between crptocurrencies and CBDCs is that cryptocurrencies are digital assets on a decentralised network while CBDCs are digital fiat.

A fiat currency is a form of money declared by the government as a legal tender and is trusted that people will find it valuable or simply a country’s currency.