"Bank of Botswana Ponders if a Central Bank Digital Currency is Essential"

Botswana, a country known for its cautious approach to innovation, is delving into the world of digital currencies. The Bank of Botswana, the nation's central bank, is currently conducting a feasibility study to determine if a Central Bank Digital Currency (CBDC) is necessary.

Ruth Baitshepi, Head of the Digitalisation and Innovation Hub at the Bank of Botswana, made this announcement during a media briefing. This move aligns with the research-driven stance seen across Southern Africa, where central banks in Namibia, Zambia, and South Africa have also undertaken similar assessments.

Botswana issued its first Virtual Asset Service Provider (VASP) license under the Virtual Assets Act in 2022, making it one of the few African nations with a formal legal framework for crypto and virtual asset regulation. However, the country is keen to avoid premature deployment of a digital currency without fully understanding the legal, technical, and economic dimensions.

The Bank of Botswana's exploration of a CBDC is aimed at building a robust understanding before any decision on rollout. This approach is a response to concerns raised by the CEO of Standard Bank, Africa's largest bank, who expressed worries that retail CBDCs could disrupt the banking system or create unfair competition.

Meanwhile, the Central Bank of Kenya has stated that a CBDC is not a compelling priority in the short to medium term. In contrast, the Central Bank of Nigeria announced in 2024 the development of a sandbox for a CBDC, and Namibia's central bank has confirmed it is developing a CBDC sandbox to guide further testing.

South Africa's Project Khokha has seen the South African Reserve Bank experiment with wholesale digital currency settlements. This regional push toward modernizing payment systems within the Southern African Development Community (SADC) is not limited to Botswana. The Bank of Botswana is part of this movement, aiming to create an interoperable and inclusive digital finance ecosystem in the SADC region.

On a global scale, the IMF Managing Director has announced that they are working on a global CBDC platform. This initiative underscores the growing interest in digital currencies worldwide.

As the Bank of Botswana continues its research, it is expected to provide further updates on its findings and potential pilot phases. The country's careful approach to digital currencies reflects its commitment to making informed decisions that benefit its economy and citizens.