The Rwandan Central Bank is interested in exploring central bank digital currencies to reduce the costs associated with transacting by optimizing efficiency. As per BNN Bloomberg, August 22, 2019, Rwanda’s Central Bank looks to authorities in Canada, Singapore, and Holland for inspiration as they have successfully studied the applications of blockchain.
More Central Banks Come On-Board
Monetary authorities across the globe have been struggling to understand and regulate digital currencies like bitcoin and ether. Since they have realized that regulation of bitcoin is a tricky issue, they are increasingly accepting the possibility of launching their own cryptocurrency on a permissioned ledger only accessible by them.
In fact, CBDCs would be much better if they weren’t launched on a blockchain. Blockchains help introduce decentralization and censorship resistance; since these would be centralized ledgers anyway, the network could scale a lot faster with regular servers.
Rwanda’s biggest concerns are with respect to digitizing the entire supply of currency. Moreover, the Director General of Financial Stability for the country is worried about the side effects of an outage on the network.
Rwanda could be the first African country to issue digital fiat currency, which would be a huge stride forward for the entire region as they tackle the issues plaguing the payments sector.
CBDCs Would Spell the End of Privacy
Transacting via bank transfers, plastic cards, and most cryptocurrencies intrinsically kill user privacy by creating a detailed digital trail that can be tracked by any authority and even some private entities.
Cash is by far the most private form of money that exists today, as it has the greatest fungibility and no single note has a history of where it was spent and why it was spent.
CBDCs would reduce the circulation of cash in an economy, effectively destroying financial privacy.
If the interest shown by central banks to issue CBDCs comes to fruition, privacy coins like Monero will be paramount to establishing individual financial privacy.