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Zambia’s central bank expects to complete research on forming a digital currency that could cut transaction costs and boost participation in the formal financial system by the fourth quarter.
“The results of the research will form part of the input in the policy considerations on whether to introduce a central bank digital currency in Zambia,” Nkatya Kabwe, acting assistant director of communications at the regulator, said in response to emailed questions.
CBDCs are government-backed digital currencies developed by central banks after the rise of cryptocurrencies such as Bitcoin and Ethereum. Cryptocurrencies are not legal tender in Zambia, the central bank said earlier this month and “people who want to deal in them should have a clear understanding of all the risks that come with such payment and investment instruments.”
The Bank of Zambia is researching CBDCs as they have the potential to expand financial inclusion, improve traceability, safety and efficiency of payment systems, Kabwe said.
Analysts at the Bank of America Corp. have warned that central banks that don’t introduce their own digital money risk losing monetary control and seeing the demand for their currencies drop as their citizens start using another country’s digital cash.
Zambia joins nations such as Israel, Ghana, the Bahamas, Nigeria, China and the U.S. that are considering or have introduced CBDCs.
(Provides clarity on CBDCs in paragraph three)
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