The Zambian central bank has revealed that it is in the process of researching central bank digital currencies (CBDCs), and plans to implement them by the end of the fourth quarter if the outcomes look positive. This comes after the government of the landlocked East African republic issued warnings about cryptocurrencies earlier in the year.
According to a Bloomberg report, Zambia has joined the growing list of countries researching CBDCs with the joint aim of cutting transaction costs and increasing citizens’ participation in the formal financial system, as well as providing a major upgrade to traceability.
Jamaica is planning to roll out a CBDC in early 2022, and even Australia’s indigenous Sovereign Yidindji Nation in the rainforests of far north Queensland has digitised its own currency.
CBDCs Making Headway
In a recent speech by Kristalina Georgieva, managing director of the International Monetary Fund (IMF), there are about 100 countries currently in some phase of exploring CBDCs, be it research, testing, or distribution.
We have moved beyond conceptual discussions of CBDCs and we are now in the phase of experimentation. Central banks are rolling up their sleeves and familiarising themselves with the bits and bytes of digital money.
Kristalina Georgieva, managing director, IMF
Georgieva added that if CBDCs are well designed, they could offer “more resilience, more safety, greater availability, and lower costs than private forms of digital money”.
Governments Want CBDCs, Not Crypto
According to Bloomberg, earlier this month the Zambian central bank made it clear that cryptocurrencies are not legal tender and should be used “at your own risk”.
Many countries are planning on replacing fiat money with CBDCs due to the advantages they bring to enforce monetary policy. With the advent of digital currency, many more people will be able to participate in the financial system. However, in third world countries, many people don’t have access to devices or the internet, which makes the use case more difficult.
One of the other driving factors is that people are now able to use more methods of payment and currencies than ever before. If the citizens of a country start preferring another currency to their own, it could have negative effects on that native currency.
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