The National Bank of Ethiopia (NBE) has taken another step into the world of digital finance by announcing its exploration of Central Bank Digital Currency (CBDC).
The bank, in collaboration with Giesecke+Devrient (G&D), a German company that provides banknotes, securities printing, and smart cards, hosted a workshop on efficient currency management operations for the banking community yesterday, November 8, 2023.
“NBE will pursue a strategy of enhancing electronic payment system, modernizing current currency management system and exploring the potential of CBDC,” wrote the regulator on X, formerly Twitter.
CBDC is a form of digital currency issued by a country’s central bank. They are similar to cryptocurrencies, except that their value is fixed by the central bank and equivalent to the country’s fiat currency. Many countries are developing CBDCs, and some have even implemented them, with different levels of success.
Researchers state that CBDC can help Ethiopians through cross-border payments and financial inclusion.
“Interoperability of digital birr with other currencies would be especially beneficial in multi-currency Central Bank Digital Currencies (m-CBDCs), which refer to agreements with other countries central banks to make digital currencies interoperable,” states Michael Tomas, an Associate Consultant at Shega Insights.
The CBDC news also comes at the same time where India is urging Ethiopia to consider settling trade transactions in local currency.
According to Birrmetrics, an Addis Ababa-based digital news media, the call aims to enhance bilateral trade and strengthen economic ties and was made during the conclusion of the 6th Session of the India-Ethiopia Joint Trade Committee (JTC), held in Addis Ababa from November 6-7, 2023.
During the discussions, India extended an invitation to Ethiopia to collaborate on its Unified Payment Interface (UPI) with Ethswitch, Ethiopia’s national payment switch. This collaboration could pave the way for seamless and secure transactions between the two countries, facilitating trade and boosting economic cooperation, according to Birrmertics.