Central Bank Digital Currencies (CBDCs) are owned, issued, and controlled by a country’s central bank. They are digital, virtual, or electronic versions of a country’s currency. In other words, they are digital, electronic, or virtual representations of a country’s national currency.
Central Bank Digital Currencies (CBDCs) are slowly but gradually taking up a place in today’s financial world. They are governments’ replacements for cryptocurrencies which are banned in many countries across the world. They will, when fully instated in economies across the world, perform important functions like narrowing the financial inclusion gap as well as making cross-border and domestic payments be performed easily and seamlessly.
Uganda’s central bank is considering issuing its central bank digital currency and if it does, it’ll be joining the continent giant, Nigeria, in doing so. Although cryptocurrencies are not banned in Uganda, like in Nigeria, the country’s apex bank would like to examine central bank digital currencies in relevance to its policies. The country, however, still has concerns about the risk that cryptocurrencies pose in regard to financial inclusion and consumer protection.
The “Bank of Uganda is currently doing preliminary studies on whether or not a central bank digital currency should be considered … and especially explore what policy objectives it would address,” Andrew Kawere, the apex bank’s director for national payments said in a recent interview.
He also added that “Is it financial inclusion that we want to solve, is it payments, is it to support innovations in the financial space? That is an unanswered question,” suggesting that the whole cause is to examine the available possibilities by the bank.
The director said that the bank had not tasked itself with a deadline for concluding its study on central bank digital currencies or even issuing them to the general public. What he did seem certain of was that the study will be focusing on the risks associated with the technology. “Consumer protection; this is a very big concern for us as Bank of Uganda. In Uganda we have low levels of digital financial literacy … the population needs a bit of protection from some of these fairly advanced financial innovations,” he said.
He also hammered on access. He said that access could be a challenge when rolling out a new financial solution such as a CBDC because of the low level of penetration as a result of the need for smartphones, computers, and the internet. “It could lead to financial exclusion for those that can’t have access,” he explained.
Ibhadojemu Lucky Emmanuel is a graduate of Education and Economics from the University of Benin. He has a passion for tech and business and has been writing professionally for over a period of five years. He's written across various topics and segments and knew tech-business was it when he first stumbled on it. He has a great passion for music and arts, and wants to visit as many countries as he can someday.
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