An international agency is urging central banks to help strengthen national digital ID systems and make it easier to enforce KYC requirements. The International Monetary Fund (IMF) says in one of its latest reports that digital currency rollout is gradually gaining traction in Sub-Saharan Africa, but countries need to build the digital infrastructure and legal framework to facilitate the process. .
Nigeria introduced a digital currency – the e-Naira – in October last year, while the central banks of Ghana and South Africa are conducting pilot projects for a central bank digital currency (CBDC).
The IMF report notes that while there are risks and benefits associated with a digital currency, countries that have deployed it or plan to do so “will need to improve access to digital infrastructure such as a telephone or internet connectivity”.
In the case of Nigeria, which has already deployed digital currency as legal tender, greater adoption of digital ID and improved KYC approval rates have been identified as a way to improve the economy more broadly, such as in a report commissioned by VerifyMe and published earlier this year. The country plans to complete its digital ID registry by 2025.
Meanwhile, the Fund informs that the Central Bank of Nigeria as well as those in other countries that are testing or considering a digital currency will also need to put in place the necessary systems to manage data privacy risks arising from cyber criminal activities.
Although the CBDC may have a negative impact on the ability of banks to lend in countries with unstable financial systems, the IMF also sees likely positive results. “The first is the promotion of financial inclusion. CBDCs could bring financial services to people who did not have bank accounts before, especially if they are designed for offline use. In remote areas without internet access, digital transactions can be done at little or no cost using simple feature phones,” reads part of the report.
According to the report, the CBDC, among other things, is more secure and stable, can be useful for government-to-person social assistance payments, as well as facilitating international money transfers and payments, especially to foreign countries. sub-Saharan Africa which is rated by the IMF. as the most expensive region in the world to receive or send money.
In a similar Business Day article, the Deputy Governor in charge of economic policy at the Central Bank of Nigeria, Kingsley Obiora, underlines the importance of digital identity for the deployment of a digital currency, adding that a A country must also have the appropriate legal framework and must conduct adequate awareness on the importance of a digital currency.
Apart from Ghana and South Africa which are running pilot projects for different models of digital currency, research on its adoption is underway in Uganda, Kenya, Rwanda, Mauritius, Madagascar, Zimbabwe, Eswatini, in Namibia and Zambia.
On e-Naira, a recent Global CBDC Index report by PricewaterhouseCoopers (PwC) and quoted by Business Day mentions that “digital currency is expected to support the country’s goal of increasing the level of financial inclusion from 64% to 95 %. By integrating the E-Naira platform with the financial ecosystem, the CBN hopes to develop new use cases in the private sector to support CBDC adoption.
Africa | biometrics | central bank digital currency (CBDC) | cybersecurity | data privacy | digital identification | financial services | IMF | KYC | payments | social Security