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African central banks are exploring the use of a central bank digital currency (CBDC) for cross-border payments in the region. In a meeting hosted in Kenya recently, 13 national and regional central banks discussed possible collaborations on a cross-border CBDC and the impact it would have on compliance with regulatory standards.
Africa’s cross-border payments system has remained one of the world’s costliest and least accessible, with the World Bank revealing that fees average 8.17%, twice the cost in South Asia. The region is now exploring the feasibility of a CBDC to transform the sector.
As per a statement by the Financial Stability Board, the 13 central banks convened in Nairobi to discuss the role of a CBDC in cross-border payments and how it would impact monetary and fiscal policies.
“The group discussed initiatives to enhance cross-border payments in the region, including potential use of central bank digital currencies for cross-border payments while noting the importance of compliance with anti-money laundering and combating the financing of terrorism (AML-CFT) standards,” the FSB said in its statement.
The participants at the meeting included central bankers from Nigeria, South Africa, Ghana, Uganda, Tanzania, and Zambia, with Rwanda, Burundi, Congo, and South Sudan invited as guests. Regional banks were also at the meeting, including the Bank of Central African States (BEAC) and the Central Bank of West African States (BCEAO).
Most of the central banks in attendance are exploring CBDCs for domestic payments. Nigeria is the most advanced, having launched its eNaira in October 2021, although it hasn’t fared as well as expected. Ghana, Kenya, and South Africa are all at varying stages of their CBDC exploration and development.
While this is the first initiative of its kind in Africa, other central banks globally have been exploring CBDCs for cross-border payments for several months now. South Africa’s Reserve Bank has been involved in one such trial, partnering with the Bank for International Settlements (BIS) and three other central banks—Malaysia, Singapore, and Australia—on Project Dunbar.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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