The National Bank of Rwanda (BNR) has conducted a feasibility study on the implementation of a central bank digital currency (CBDC) in the country. The study highlighted the opportunities for improving the payments landscape in Rwanda through the adoption of a CBDC, tailored to local norms and conditions. The bank identified four key “sweet spots” for a CBDC, including increasing resilience against power or network outages, enhancing innovation and competition with other CBDCs, moving towards a cashless economy, and facilitating faster, cheaper, and more transparent international remittances.
While the potential benefits of a CBDC are significant, the BNR also outlined several challenges that need to be addressed. One major concern is the risk of low adoption of the CBDC by the public, financial service providers, and merchants. To mitigate this risk, the bank emphasized the importance of clearly explaining and articulating the benefits of CBDC in a simple manner to Rwandans. It also stressed the need for a seamless user experience that combines the strengths of both private and public currencies, without competing directly with existing electronic money issuers (EMIs).
In order to address these challenges and maximize the benefits of a CBDC, the BNR recommended a token-based CBDC model with open programmability. This would allow for greater flexibility in how the CBDC is used and integrated into existing payment systems. Additionally, the bank proposed the development of an offline-capable CBDC that can be used even in the absence of internet connectivity, using technologies such as Bluetooth or Near Field Communication (NFC). By incorporating these features, the BNR aims to enhance the accessibility and usability of the CBDC for a wide range of users across Rwanda.
The feasibility study also examined the potential risks and concerns associated with the adoption of a CBDC in Rwanda. These include challenges related to security, privacy, and financial stability, as well as the need to address regulatory and legal issues. The BNR highlighted the importance of developing a robust regulatory framework to ensure the safe and secure implementation of a CBDC, while also promoting competition and innovation in the financial sector.
Overall, the BNR’s feasibility study provides valuable insights into the opportunities and challenges of adopting a CBDC in Rwanda. By carefully considering these factors and developing innovative solutions to address key concerns, the central bank aims to create a digital currency that not only enhances the efficiency and reliability of the country’s payment systems but also promotes financial inclusion and economic development for all Rwandans. With a strategic approach to CBDC implementation, Rwanda has the potential to transform its financial landscape and emerge as a leader in the digital economy in the years to come.
