The Bank of Uganda (BOU) has launched a feasibility study on the possibility of introducing a digital currency. However, an institution executive cautioned that the central bank should be clear about why it needs this in the first place.
Money Transfers Are Now More Rapid
According to reports, Uganda’s central bank has begun researching the viability of issuing a CBDC for usage by households and companies. Additionally, the BOU is said to be considering revising the country’s financial legislation. This action authorises the BOU to adopt the CBDC in its entirety.
According to a report, this central bank’s decision is welcomed by proponents of CBDCs, who argue that such a digital currency will enable Ugandans to move money more cheaply and quickly.
Nonetheless, Charles Abuka, the bank’s executive director for operations, stressed in a recent interview that the BOU must be clear about why it wishes to establish the CBDC in the first place. As he stated:
To begin, it is necessary to identify clearly what the rationale is for having it, why we must have it, and what challenges it will assist us in resolving.
Additionally, Abuka claimed that the issuing of CBDC will almost certainly have “technological ramifications.” He stated that developing the technology infrastructure for such a digital currency will be costly, and the central bank must grasp the ramifications of these expenses. He also stressed the vulnerability of digital currency to cyber-attacks.
The CBDC Provides the Central Bank with the Ability to Trace Transactions
Despite the BOU’s reservations, Noah Baalessanv, a proponent of digital currencies and a blockchain consultant in Uganda, maintains that a CBDC will enable the central bank to gain a feel of the “real economy.” Baalessanv stated that, in contrast to a cash economy, which is also inefficient and opaque, a CBDC puts the central bank in a position to trace transactions.
However, the blockchain analyst cautioned that the issuing of a CBDC is likely to result in the abolition of financial institutions from the banking system. While releasing digital currency directly to users is more efficient, Baalessanv notes that this can also be the “most harmful” characteristic of a CBDC.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.