Bank of Namibia Considering CBDC for Cross-Border Payments

The Bank of Namibia is assessing the issuance of a CBDC aimed at improving cross-border payments and financial inclusion. Under the guidance of the IMF, the BoN has entered a preparatory phase for this potential rollout, focusing on enhancing existing payment systems instead of an immediate CBDC launch. Engagement with neighboring countries indicates a collaborative approach to exploring CBDC feasibility in the region.

The Bank of Namibia (BoN) is contemplating the issuance of a central bank digital currency (CBDC) to enhance cross-border payments and promote financial inclusion. Currently, the bank is in a preparatory phase for a potential CBDC rollout, following a technical assistance mission from the International Monetary Fund (IMF), which provided guidance on the necessary steps for implementation.

Kazembire Zemburuka, the BoN’s director of strategic communications and international relations, conveyed that the bank is assessing how a CBDC could advance financial inclusion. Notably, the BoN’s CBDC development is influenced by the IMF’s recommendations, outlined in a five-phase guideline for introducing digital currencies. This includes phases such as preparation, proof-of-concept, prototypes, pilot, and production.

Moreover, the Bank of Namibia is engaging with central banks from Eswatini, Lesotho, and South Africa to gauge the feasibility of a CBDC tailored for cross-border transactions within these nations. While the IMF supports the exploration of a CBDC, it has advised against an immediate launch, suggesting that Namibia first enhance its existing payment systems without pursuing a retail CBDC, which may not directly address financial inclusion challenges.

The IMF emphasized, “As the mission did not find strong support for rCBDC issuance to address gaps in payments, it recommends against pursuing advanced technological exploration beyond proof-of-concept until tangible benefits of CBDC for payments are evident.” The report indicates that Namibia could consider alternative solutions to bolster financial inclusion rather than developing a new payment infrastructure.

Previously, Namibia contemplated a digital version of its currency in 2022 upon releasing a consultative paper regarding CBDCs. Collaboration with central banks in Eswatini, Lesotho, and South Africa continues, yet little progress has been reported to date. Other African nations have made strides in this area, with Nigeria launching the eNaira in 2021 and Zimbabwe introducing a gold-backed digital currency in 2023.

The Bank of Namibia is cautiously exploring the potential implementation of a CBDC to facilitate cross-border payments and enhance financial inclusion amidst guidance from the IMF. While the development remains in its preparatory stages, the bank is heeding recommendations to focus on improving existing infrastructure prior to the introduction of a digital currency. The discourse with neighboring nations continues, reflecting an ongoing regional interest in digital currency solutions.

Original Source: www.mariblock.com