The case for and against CBDCs

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  • Digital currencies have changed how the world, or at least how early adopters, think about money
  • Monetary policy efforts may be compromised in the age of central bank digital currencies
  • Central bank digital currencies are blockchain-based or digital assets issued and regulated by central banks of countries or monetary territories

Digital currencies have changed how the world, or at least how early adopters, think about money. They’ve certainly grown in popularity in a pattern reminiscent of internet adoption but have seen their fair share of challenges thus far.

One of the pain points with cryptocurrencies is how they can be used for illicit dealings. Not unique but a real challenge, the idea of Central Bank Digital Currency  (CBDC) is to remedy this by having a digital currency issued and supervised by a central bank. While this flies in the face of one of the more popular cryptocurrency features, decentralisation, it’s something many agree is needed moving forward.

  • Over 90 countries are currently working on CBDCs
  • CBDCs are presented as “safe” digital money
  • CBDCs may face challenges in adoption

Central Bank Digital Currency

Central bank digital currencies are blockchain-based or digital assets issued and regulated by central banks of countries or monetary territories. With Fiat currencies, a central bank issues notes and coins that are also represented by bank balances. With a central bank digital currency, the digital currency is issued by a central bank and may work in tandem with an existing fiat currency. Motivations behind having central bank digital currencies are similar to those for having cryptocurrencies.

Read: How bitcoin is advancing the human race

It’s not all roses and sunshine as central bank digital currencies raise many questions. Fiat currencies suffer because of a lack of trust in the issuer and there is no guarantee issuing the currency digitally on a blockchain makes any difference.

Central Bank Digital Currencies the future

Whether we like it or not, central bank digital currencies look like the future. Ninety-one countries across the globe are looking at and working on central bank digital currencies. Sixteen of those countries are African. It is expected that 20% of the world’s central banks will issue central bank digital currencies within the next three years.

The world currently has three active central bank digital currencies; The Bahamian Sand Dollar, The East Caribbean countries (Antigua & Barbuda, Saint Lucia, Saint Kitts & Nevis, Saint Vincent & the Grenadines, Grenada, Montserrat and Dominica) Dcash and Nigeria’s e-Naira.

As many as 40 countries worldwide are in advanced stages of central bank digital currency development. The amount of energy and resources being dedicated tells us that central bank digital currencies are certainly in our future. With that in mind, let’s examine the case for and against central bank digital currencies.

The case for central bank digital currencies

First, we should look at the case for central bank digital currencies. It’s important to understand that central bank digital currencies are not the next iteration in digital currency per se but rather a bridge between fiat currency and cryptocurrency. Understanding this will help us realise that central bank digital currencies will offer something akin to the best of both worlds.

Improving payments landscape

Cryptocurrencies have shown that the world of payments was due for a quantum leap and blockchain technology brought that to us. At full capacity and with wider acceptance, digital currencies can vastly improve the payments landscape. central bank digital currencies will have the advantage of utility, and wider adoption is usually a catalyst for greater innovation.

Cross border payments

With a multiplicity of cryptocurrencies in operation, we’ve seen a problem similar to that with multiple fiat currencies. Where the fiat system has used intermediary banks, which make the cost and speed of cross-border transfers undesirable, digital currencies haven’t done much better with exchanges and swaps also proving costly.

A central bank digital currency project dubbed Project Dunbar was embarked on by the Bank of International Settlements and four central banks (Australia, South Africa, Singapore and Malaysia) to test how central bank digital currencies can be used for cross-border payments and the results were encouraging. The test proved that it was possible and t lower cost while being fast and effective.

Improve financial inclusion

Financial inclusion is a big topic in Africa. The current systems used in money are expensive to maintain, and there is a tendency for financial inclusion to cluster in major population centres while leaving out more remote areas. This is a major problem for Africa because populations in many if not all countries are skewed towards rural populations.

Reducing the cost of access to and transacting in financial systems can channel improvement in financial inclusion. Mobile money has proved this across the continent with examples such as Kenya’s M-Pesa and Zimbabwe’s Ecocash. Digital currencies could take this further.

Safe digital money

A key feature of digital money in Africa thus far is the way scammers have preyed on people through digital platforms. Many scams have been presented as digital money or cryptocurrency. The scammers have taken advantage of the understanding that digital money is the future. central bank digital currencies can bring all the benefits of digital currency with safety for citizens of countries that issue them.

The case against central bank digital currencies

Nothing is universally good, and we must look at the idea of central bank digital currencies from all perspectives to see what could stand in their way.

Change the status quo

While changing matters of payment, financial inclusion, and how we look at money is good for the users, the providers and intermediaries may see this as a threat, and in some cases, it is. Due to the power the providers wield, we will have to consider this as something more against central bank digital currencies than for them.

Drawing a likeness to mobile money, it faced resistance (and still does) from traditional financial institutions in Zimbabwe because it took power away from them. central bank digital currencies may have the same effect.

Everything happens faster

While the speed of transacting can be considered an advantage, our history with financial crises should inform us that this speed may be a problem if we are not prepared. Collapses can happen much faster if the system works much faster. By the time we detect the problem, it may be too late. The crashes of Terra and LUNA come to mind.

Monetary policy may be compromised

Monetary policy efforts may be compromised in the age of central bank digital currencies. As pointed out above, things happen much faster. Traditional methods used by central banks to manage monetary policy tend to act slowly. So central banks may find they have to use new tricks in the central bank digital currency world.


One of the more celebrated and controversial features of cryptocurrencies is the privacy they offer users. central bank digital currencies fly right in the face of that. The right to privacy must always be balanced with the fight against money laundering, funding for terrorism and other illicit flows of funds. What constitutes illicit flows differs from country to country, and in Africa, something as simple as repatriating or remitting money can be classified as illicit flows.


Cybersecurity is another matter that must be considered when examining central bank digital currencies. While blockchains are generally safe, the wallets, platforms and humans using them are not always up to the task. This means a considerable amount of energy must be spent making sure cybersecurity meets the new needs that central bank digital currencies and blockchain will bring with them.

Opinions may be divided on which of these matters will affect central bank digital currency adoption the most. We are certain that central bank digital currencies are being worked on by many countries and will soon be with us. Some or maybe all of the questions brought up will be answered along the way.

Read: Africa: stablecoins offer an efficient solution for cross-border remittances


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Kudzai G Changunda
Kudzai G Changunda
Finance guy with a considerable interest in the adoption of web 3.0 technologies in the financial landscape. Both technology and regulation focused but, of course, people first.