The National Bank of Rwanda (BNR) has unveiled its completed feasibility study on a retail central bank digital currency (CBDC) and is seeking public feedback. The proposed CBDC aims to leverage the latest technological advancements while addressing local conditions in Rwanda.
According to the BNR, implementing a retail CBDC could bolster Rwanda’s cashless economy initiative and enhance the resilience of the financial system, particularly in light of frequent power outages. Despite efforts to promote cashless transactions, the BNR anticipates spending $35 million on printing and maintaining cash over the next five years.
The proposed CBDC is envisioned as an interest-free, intermediated digital currency with interoperability across existing payment systems and potentially other CBDCs. The BNR suggests adopting a token-based model with open programmability and smart contracts, enabling offline transfers using Bluetooth or Near Field Communication (NFC) technology without requiring a smartphone.
Currently, payment service providers constitute less than 0.9% of Rwanda’s financial sector, facing challenges such as low financial literacy and high remittance costs. The BNR believes that reducing cash circulation could formalize more of the economy.
While the study recommends user fees and holding limits, details are yet to be finalized. Public acceptance of the proposed CBDC remains an open question.
The BNR favors a distributed database model over a distributed ledger for increased reliability, drawing insights from the World Economic Forum’s CBDC Policy-Maker Toolkit.
Projects exploring tokenized wholesale CBDCs have been initiated by entities like Mastercard, Ripple, the European Central Bank, and the Bank for International Settlements’ Project Agora. However, tokenization in a retail CBDC context represents a potential innovation. Offline CBDC transfers are also under current research, with China’s digital yuan offering similar solutions to those proposed by the BNR.
