Occasional Paper 353 - China’s Central Bank Digital Currency: A New Force in African Finance?

This marks a new phase in the application of digital currency interoperability and application.20 Given the rise in the number of central banks exploring adoption of a digital currency, including in Africa, ‘a closer look at how the idea of CBDCs develops would be vital to a better understanding of their value today and their potential in shaping the global financial system in the future’.21 Moreo. [...] In the US, for example, the Republican leaders of Florida have already passed a law to ban the adoption or use of CBDCs in the state, on the basis of the risks to individual liberties these will hold if introduced, as argued by the related politicians.46 Opponents of CBDCs also fear that widespread use of a CBDC would increase the ‘ability of petty tyrants to control the finances of their citizens. [...] Pettis argues that this role of the dollar transforms the US into adopting the role of global consumer of last resort; and that that, in turn, has, for example, helped undermine employment and the manufacturing sector in the US.59 In that context, the advance of cryptocurrencies offers the potential of a paradigm shift. [...] In this case, China’s role in the international financial system may expand significantly The e-CNY: Africa and China‒Africa considerations A handful of African countries are leading the pack in the context of implementation and research around the use of CBDCs on the continent, especially Nigeria, which is the only country on the continent with a CBCD in operation (Table 1). [...] Discussions in the Bahamas and the broader Caribbean context, and the role of the Caribbean Development Bank and monetary authorities, may also offer useful starting points for learning and much greater public debate on the benefits and costs of the CBDC era.