A study has been initiated by the Bank of Uganda (BOU), which examines whether it is possible to issue a digital currency. A senior executive at the Bank of Uganda (BOU) warned however, that the central banking institution must be clear about why they need this currency.
Money Moves Faster
According to reports, the Ugandan central bank has begun studying whether it is possible for a CBDC to be issued that can be used both by individuals and businesses. In addition, the BOU is reportedly planning to revise the country’s financial laws. This allows the BOU adopt formal the CBDC.
This central bank’s decision, according to a report, is supported by proponents of CBDCs who insist that such a digital currency would enable Ugandans to move money cheaply and at a much faster pace.
Nevertheless, the bank’s executive director for operations, Charles Abuka, cautioned during a recent interview that the BOU needs to be clear about why it wants to launch the CBDC in the first place. He explained:
The first is to understand the reasoning behind it.
Abuka also argued that the issuance of CBDC is likely to have “technology implications.” He said the technology architecture of such a digital currency will come at a cost and the central bank needs to understand the implications of these costs. Abuka also pointed out that cyber-attacks could be a problem with digital currencies.
CBDC Enables Central Bank To Trace Transactions
Despite the BOU’s concerns, one of Uganda’s digital currency proponents and a blockchain consultant, Noah Baalessanv, insists that a CBDC will allow the central bank to get a sense of the “actual economy.” Baalessanv added that unlike a cash economy — which is also expensive to maintain and opaque — a CBDC leaves the central bank in a position where it can trace transactions.
However, the blockchain consultant warned that any CBDC issuance could lead to financial institutions being excluded from the banking system. According to Baalessanv, while issuing digital currency directly to users is more efficient, this can also be the “most dangerous” attribute of a CBDC.
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