Central Banks around the world have initiated discussions on the prospects for the introduction of Central Bank-issued Digital Currencies (CBDCs) to improve the efficiency and safety of their
payments systems.

A CBDC, also commonly referred to as digital currency, is an electronic representation of legal money of a particular jurisdiction that is issued and regulated by the central bank or monetary authority of a country.

International bodies like the International Monetary Fund (IMF) are encouraging central banks to explore CBDCs, highlighting that CBDCs could strengthen the benefits and reduce some of the costs and risks to the payment system and could help improve financial inclusion. The Bank of International Settlements (BIS) has reported that 80 per cent of central banks are taking initiative on CBDCs with some actively piloting them.

Eswatini has not been left out on this very important opportunity in the payment systems space. In June 2019 the Central Bank of Eswatini held a consultative forum with industry to explore the possibility of introducing a CBDC in the country. Following recommendations from that forum, the Bank engaged the Centre for Financial Regulation and Inclusion (Cenfri) to conduct the first phase of the four-phased CBDC diagnostic study.

The study, available on the Central Bank of Eswatini website, seeks to understand the value a CBDC would contribute to the Kingdom’s financial system and whether further exploration of CBDC and potentially conducting pilot-testing would be justified. The study explores three CBDC use cases; the Payments CBDC use case, Consumer CBDC use case and the Economic Policy CBDC use case.

The diagnostic study has four planned phases to assess the potential of CBDC in Eswatini.

The phases are as follows:

• Phase 1: Deepen understanding of potential benefits in Eswatini.
• Phase 2: Evaluate key prerequisites and regulatory environment.
• Phase 3: Conduct gap analysis and feasibility assessment.