Uganda, an East African country of more than 42 million people, is considering issuing its own central bank digital currency (CBDC).
Andrew Kouer, director of national payments at the Ugandan central bank, made it clear that they are looking to issue a digital currency, despite their concerns about technology risks, including consumer protection and financial inclusion.
“The Bank of Uganda is currently conducting preliminary studies on whether or not to consider a central bank digital currency, in particular exploring the policy objectives it will address,” Kawer said.
“Is it financial inclusion that we want to solve, is it payments, is it to support innovations in the financial field? That is an unanswered question.”
So far, African governments have dealt with these issues in different ways. While Nigeria’s central bank banned local banks from dealing with cryptocurrency before launching its central bank digital currency, the Central African Republic adopted bitcoin as its official currency last month.
Kawer explained that access to CBDCs may be problematic due to low levels of penetration of critical infrastructure, such as smartphones, computers and the Internet.
In this sense, he emphasized that consumer protection is a priority for them, as “in Uganda we have low levels of digital financial literacy, and the population needs a little bit of protection against some of these fairly advanced financial innovations.”
“It could lead to financial exclusion for those who do not have access to the currency,” he added.
On the other hand, he mentioned the bank’s concerns about the volatility of cryptocurrencies, which affects its ability to act as a store of value.
Kawere explained that cryptocurrencies have already been used unofficially in Uganda, but the central bank has warned licensed payment service providers to slowly use it while the regulator studies the technology and develops regulatory mechanisms.
“So the Bank of Uganda has not banned cryptocurrencies, we have put some speed brakes on,” Kawer said.
Ugandans received cryptocurrencies worth about $4.8 billion between March 2019 and March 2022.
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