Member nations of the East African Community will look into the possibility of a central bank digital currency (CBDC) for their common payment system, in order to overcome their aversion to trading in each other’s currencies.
The bloc’s secretariat stated in a recent television campaign that developments in technology and creativity have opened the opportunity for new types of cross-border payments, even as it works to revamp the faltering East African Payment System (EAPS), which was introduced in May 2014.
“Review recent advances in technology and innovations that have created the potential for new payment infrastructures and arrangements that could be applied to cross-border payments,” the secretariat said in a May 21, consultancy call for a feasibility study on the planned upgrade of the EAPS.
“The consultant will conduct an exploratory scoping of such developments, as well as emerging technologies and their adoption, including but not limited to technologies involving the use of Central Bank Digital Currencies (CBDCs),” it added.
Here Is What You Need To Know
- The establishment of a CBDC might present an alternative for EAC partner nations who want to achieve a unified currency for the region by 2024, as stipulated by the bloc’s Monetary Union Protocol.
- A CBDC represents the virtual form of a nation’s or region’s fiat currency with an electronic record or digital token. These digital currencies are centralized, with the country’s responsible monetary authority issuing and regulating them.
- The establishment of a CBDC might present an alternative for EAC partner nations who want to achieve a unified currency for the region by 2024, as stipulated by the bloc’s Monetary Union Protocol.
- A CBDC represents the virtual form of a nation’s or region’s fiat currency with an electronic record or digital token. These digital currencies are centralized, with the country’s responsible monetary authority issuing and regulating them.
- Kenya now controls the majority of East African Payment System (EAPS) transactions, which allow inhabitants of member nations to send and receive payments in regional currencies such as the Kenyan shilling, Ugandan shilling, Tanzanian shilling, Rwandan franc, and Burundian franc.
- Only three partner countries — Kenya, Tanzania, and Uganda — had built a national real-time gross settlements (RTGS) system when EAPS went online in 2014.
- As a result, the three nations began cross-border financial transfers in their respective national currencies, using the existing RTGS infrastructure as the cross-border payment settlement mechanism.
- After completing the installation of the RTGS in 2014, Rwanda joined the EAPS in December 2015. Burundi, which just finished its RTGS deployment, is anticipated to join the EAPS, while South Sudan will do so after it completes its RTGS deployment.
East African digital currency East African digital currency
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
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