Reserve Bank of Malawi to explore digital currency

By Benadetta Chiwanda Mia:

The Reserve Bank of Malawi (RBM) has said it is taking a cautious step forward to explore potential benefits and implications of adopting central bank digital currencies (CBDC).

This is according to an addendum published by the central bank on Tuesday, inviting proposals for consultancy to facilitate the development and experimentation of the CBDC.

A CBDC, unlike decentralised crypto currencies, is a digital currency issued by a central bank, maintaining a value equivalent to the country’s fiat currency.

Responding to a questionnaire, RBM spokesperson Mark Lungu said the initiative is exploratory.

“First and foremost, the Reserve Bank is not introducing a CBDC in Malawi but is simply exploring more on the subject in line with its strategic plan,” Lungu said

Lungu said more than 90 percent of central banks in the world are exploring CBDCs and that Malawi does not want to be left behind.

According to Lungu, the primary objectives of considering a CBDC in Malawi include promoting financial inclusion, increasing payment system efficiency, enhancing transaction safety and potentially reducing currency printing costs.

“Malawi, like many countries, intends to research into CBDCs to assess if the country could reap these benefits,” Lungu said.

He further said cybersecurity and technology robustness remain crucial concerns for RBM.

Meanwhile, the central bank has said it is adhering to the country’s procurement best practices with a focus on expertise and cost-effectiveness in selecting a consultant for the project.

Currently three countries, namely the Bahamas, Jamaica and Nigeria, are operating a CBDC, while others, like the Eastern Caribbean Currency Union, halted its CBDC for technical reasons and started a new pilot programme, showcasing the complexity of digital currency adoption.

As of March 2024, there were 36 CBDC pilots in operation globally and eight of the G20 have programs in development. The Brics countries— Brazil, Russia, India, China, and South Africa— are also exploring a CBDC.