Bank of Tanzania cautious over digital currencies

Saturday December 11 2021
crypto PIC
By The East African

Tanzania’s central bank has said it is in no hurry to join the cryptocurrencies bandwagon, with Governor Florens Luoga saying the bank was conducting research before committing itself.

The governor’s statement, made at a conference of Tanzanian financial sector stakeholders in Dodoma on November 26, was the first formal communication by the Bank of Tanzania (BoT) on cryptocurrency dealings since it issued a cautionary notice two years ago.

It followed confirmation of tentative plans to launch an official Central Bank Digital Currency (CBDC) system and possibly also incorporate cryptocurrencies.

Prof Luoga said the public is still allowed to dabble in crypto-related investments “at their own risk.”

“We can’t outlaw something that we are not yet competent with or regulate a game that we don’t really know how it is played. We have not reached a position where we can costerise [sic] cryptos, but we welcome applications from interested parties. All should feel free to present their ideas for consideration,” Prof Luoga said.

In its 2019 notice BoT said the trading, marketing and usage of virtual currency was a “contravention” of existing foreign exchange regulations, adding that the only acceptable legal tender remained the Tanzanian shilling.

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Calls for Tanzania to emulate other countries in formally embracing cryptocurrencies through the establishment of CBDCs have been on the increase in recent months.

President Samia Suluhu added her voice to the push in June, instructing the central bank to “be prepared” for the advent of cryptocurrencies and blockchain technology in line with global trends.

The Bahamas was the world’s first country to launch a CBDC in October 2020.

This year in October Nigeria became the first African nation to follow suit when it introduced the eNaira.

According to Prof Luoga, BoT has initiated moves to develop a digital currency platform that will include a CBDC and possibly also incorporate cryptocurrencies.

The Bahamas was the world’s first country to launch a CBDC in October 2020. This year in October Nigeria became the first African nation to follow suit when it introduced the eNaira. Meanwhile, El Salvador has this year adopted the Bitcoin as legal tender.

Several other countries, including China and India, are in the pilot stages of experimenting with CBDCs despite a general concern among many high-income economies that the rise of cryptos poses a threat to more established financial transaction systems and global fiscal stability.

“The aim is to minimise, if not mitigate, the possible effects of a CBDC on the central bank’s core business of monetary policy, financial stability and integrity, and payment system structure and development,” he added.