Rwandan Central Bank proceeds with ambitious retail CBDC project aiming for a tokenized retail CBDC with offline transfer capabilities to advance towards a cashless economy. The National Bank of Rwanda (BNR) has opened its feasibility study on a retail CBDC for public comment, considering a digital currency tailored to local conditions. The BNR aims to enhance the financial system's resilience, still prone to power outages, and reduce the $35 million expected cost of maintaining cash supply over the next five years. The proposed CBDC would be interest-free, interoperable with existing payment systems, and potentially other CBDCs, following amendments to the Central Bank Act. It suggests a token-based model with open programmability and smart contracts, allowing offline transfers via Bluetooth or NFC without a smartphone. The study acknowledges the trade-offs between programmability's benefits and privacy concerns, aiming for partial pseudo-anonymity. Challenges in the Rwandan financial sector include low financial literacy, high remittance costs, and a large informal economy. The BNR suggests user fees and holding limits for the CBDC, leaving public acceptance and the database model for further consideration. The initiative aligns with global trends in CBDC research and development, including China's digital yuan and projects by Mastercard, Ripple, the European Central Bank, and the Bank for International Settlements.

The National Bank of Rwanda (BNR) has opened up its just completed feasibility study on a retail central bank digital currency (CBDC) to public comment. The BNR is considering a national digital currency that incorporates the latest innovations in the technology and is highly tailored to local conditions. A retail CBDC would advance Rwanda’s cashless economy national initiative and increase the resilience of the financial system, which is still subject to frequent power outages, the BNR found. The central bank expects to spend $35 million on printing and maintaining its cash supply in the next five years, despite its cashless goal. The BNR is proposing an interest-free, intermediated CBDC with interoperability with all the country’s existing payment systems and potentially other CBDCs. after the appropriate amendments to the country’s Central Bank Act are made. It recommended a token-based, rather than account-based, model with open programmability and smart contracts. Tokenization would allow digital cash to be transferred offline using Bluetooth or Near Field Communication (NFC) technology and would not require a smartphone. This is in contrast to current electronic payment options. Programmability would be a mixed blessing, the study noted: “The advantages of open programmability, which facilitates value-added innovative products and services, are expected to outweigh the arguments of privacy and security.” The BNR foresaw no more than “partial pseudo-anonymity” for the CBDC. Related: BIS issues comprehensive paper on offline CBDC payments Payment service providers currently make up less than 0.9% of the Rwandan financial sector. The sector is challenged by low financial literacy, high remittance costs and a large informal economy, among other things. The BNR noted that reducing the amount of cash in circulation could formalize more of the economy. The study recommended the imposition of user fees and holding limits, without sorting out details. Public acceptance of a CBDC was also left an open question. The BNR favored a distributed database model over a distributed ledger for increased reliability. Its analysis used the World Economic Forum’s CBDC Policy-Maker Toolkit. Tokenized wholesale CBDC projects have been undertaken by Mastercard  and Ripple , as well as the European Central Bank and the Bank for International Settlements’ new Project Agora . Tokenization in a retail CBDC may be an innovation. Offline CBDC transfers is also a subject of current research. China’s digital yuan features solutions similar to those proposed by the BNR. Magazine: Powers On… Biden accepts blockchain technology, recognizes its benefits and pushes for adoption 

Rwanda Advances Towards Cashless Economy with Retail CBDC Project