A comprehensive feasibility study on the potential implementation of a Central Bank Digital Currency (CBDC) in Rwanda has revealed several key opportunities and challenges from economic, functional, legal, and financial perspectives. This study emphasises the strategic advantages and the robust design considerations necessary for the successful integration of a CBDC into Rwanda’s financial ecosystem.
The study identifies fifteen potential benefits of implementing a CBDC, with four primary ‘Sweet Spots’ that are particularly advantageous compared to existing financial solutions. These include enhancing resilience against network and power disruptions, fostering innovation and competition, advancing Rwanda’s cashless economy initiative, and improving the efficiency and inclusivity of cross-border remittances.
The recommended CBDC model is a two-tier, universal, zero-interest system with partial pseudo-anonymity, designed to interoperate with existing and future payment systems. A token-based approach supporting both online and offline transactions has been advised to cater to various user scenarios, ensuring robustness even during connectivity issues.
Legally, the CBDC should possess the same status as conventional banknotes, though modifications to the Central Bank Act are suggested to explicitly include CBDC issuance. This would provide legal clarity and help navigate potential regulatory challenges, ensuring a smooth introduction and operational stability of the CBDC.
The study also outlines significant risks, notably concerning the adoption rates among the public, financial service providers, and merchants. Strategies to mitigate these risks include detailed user research and education to foster a better understanding and acceptance of CBDC among potential users.
Moving forward, the study recommends a cautious, iterative approach to the CBDC introduction, beginning with Proof of Concept (PoC) stages and pilot testing. These steps are crucial for assessing the practical aspects of CBDC and refining the system based on real-world feedback and technological developments.
While the feasibility study provides a strong foundation for CBDC in Rwanda, it also calls for a deliberate and measured implementation process. The potential benefits, especially in terms of financial inclusion and modernisation of the payment system, position CBDC as a promising component of Rwanda’s financial future. However, a clear and thoughtful approach, involving continuous learning and adaptation, is essential to navigate the complexities of digital currency systems successfully.
