Rwandan Research Paper Recommends CBDC With ‘Partial Pseudo-Anonymity’

The recently released research paper on Rwanda’s central bank digital currency (CBDC) recommends “a two-tier, universal, zero-interest CBDC with partial pseudo-anonymity.” The paper, summarizing the key findings of a CBDC feasibility study, also advises the National Bank of Rwanda (BNR) to enable interoperability with existing payment systems and potential other CBDCs.

The study, launched by the BNR in the first half of 2021, aimed to assess the possible implications of a CBDC on Rwanda’s monetary policy and financial stability. At that time, the BNR highlighted the challenges of conducting a study on an innovation still in its formative stages.

However, according to the findings of the feasibility study, there were at least 15 CBDC opportunities identified. Nevertheless, only four so-called sweet spots are said to have “high potential benefits and limited alternative choices to obtain similar advantages.” One such high potential benefit is the CBDC’s perceived resilience against possible network outages, power failures, or natural disasters.

Another potential benefit is the competition that the Central Bank Digital Currency (CBDC) could introduce to Rwanda’s cashless payment channels, which are presently dominated by mobile money.

“Combined mobile and card-based POS payments account for 27% of total transfers while the rest of the channels account for no more than 3% of cashless payments only, an extremely low percentage reflecting an acute disequilibrium at the cashless payment channels in favor of mobile money,” the research paper said.

According to the study findings, the Rwandan CBDC could be designed as a platform open to private payment service providers. This model would not only guarantee low barriers to entry to new firms but would also enable the CBDC developer and ecosystem community to access the platform and drive innovation, thereby increasing market competition.

The CBDC’s potential contribution to helping Rwanda achieve a cashless economy over time is another significant benefit. The CBDC could make cross-border remittances cheaper, more transparent, and inclusive. This is the fourth advantage identified in the BNR research paper.

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