Bank of Uganda (BOU) has launched a study exploring the possibilities of issuing digital currency. However, the executive of the institution has already warned that the central bank should clarify in advance why it should have it.
The Central Bank of Uganda has begun to study the feasibility of issuing a CBDC, which will be used by homes and businesses. The BOU is also reportedly considering amending the country’s economic laws. This action will allow the BOU to formally adopt the CBDC.
CBDC representatives supported the central bank’s decision, arguing that such a digital currency would allow Ugandan people to move money cheaply and quickly.
However, the bank’s executive director Charles Abuka warned in a recent interview that the BOU should know exactly why the CBDC needs to be started. He said:
First, is to establish properly what is the rationale, why must we have it, what issues is it going to help us resolve.
Abuka argues that the CBDC’s issuance may have “technical implications“. He said the technology architecture of such digital currencies is costly and also that the central bank needed to understand the implications of these costs. He also pointed out that digital currencies are vulnerable to cyber-attacks.
Despite the BOU’s concerns, Noah Baalessanv, a blockchain consultant and one of Uganda’s digital currency representatives, suggested that allowing the CBDC will help the Central Bank to understand the “real economy“. Unlike the monetary economy – which is expensive and opaque to handle – CBDC will further allow the Central Bank to trace transactions, Baalessanv added.
However, Blockchain Consultant also warned that any problem with the CBDC could lead to the removal of financial institutions from the banking equation. According to Baalessanv, it is more efficient to distribute digital currency directly to consumers, which may also be the CBDC’s “most dangerous” feature.