Ethiopia’s economic reform agenda is taking a leap forward with two new proclamations set to be introduced in the House of Representatives. These proclamations, drafted by the National Bank of Ethiopia (NBE), aim to modernize the country’s financial landscape and pave the way for a central bank digital currency (CBDC).
Building a Legal Framework for the Future
One of the key aspects of the NBE Proclamation is establishing a legal framework for a CBDC. This move signals the government’s openness to exploring the potential of digital currencies while ensuring proper regulations are in place. The proclamation also addresses crucial areas like increasing the NBE’s capital and strengthening consumer protection mechanisms.
Liberalization and Innovation
The accompanying Banking Business Proclamation tackles separate but equally important aspects of reform. It proposes liberalizing foreign investment in the banking sector, allowing for greater participation and potentially boosting the industry. Additionally, it establishes a framework for addressing problem banks and fostering a “regulatory sandbox” for innovative financial solutions.
Homegrown Reforms and Global Ambitions
These proclamations align with the government’s Homegrown Economic Reform Agenda, emphasizing self-reliance and domestic solutions. This focus on homegrown reforms is further evident in Ethiopia’s existing use of blockchain technology for large government payments.
The NBE’s goals extend beyond domestic reforms. As reported by The Reporter, the bank aims to join a “Cross Border Payment System” by December, although details remain unclear. This ambition reflects a growing trend in Africa, where several countries are exploring CBDCs and digital payment solutions for increased financial inclusion and cross-border efficiency.
Learning from Africa’s Crypto Landscape
Despite the growing interest in digital currencies, Africa presents a mixed picture. While crypto adoption is gaining traction, success stories haven’t been uniform. The Central African Republic’s attempt to adopt Bitcoin as legal tender and launch its own non-CBDC cryptocurrency, the Sango, has faced significant challenges.
Also Read: Ripple vs. SEC: Fintech Leader Fights Back With CBDC Powerhouse Status
Ethiopia itself has taken steps towards economic liberalization, including ending the state monopoly on mobile money services. However, digital currencies remain illegal in the country, with regulations focusing on data mining firms attracted by Ethiopia’s cheap electricity. These contrasting approaches highlight the cautious yet evolving stance on digital currencies in Africa.
With at least 18 African nations researching CBDCs, Ethiopia’s move aligns with a broader continental trend. The success of its reforms and its chosen “Cross Border Payment System” will be closely watched, potentially shaping the future of digital finance in Africa.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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