BOZ Explores Digital Currency

The Bank of Zambia (BoZ) is due to complete its research into forming a digital currency that could cut transaction costs and boost participation in the formal financial system. 

The results of the research will inform policy considerations into whether the bank would introduce a government-backed digital currency in Zambia. 

Unlike crypto-currencies such as Bitcoin and Ethereum, bank-issued digital currencies would be tied to the value of the physical Kwacha and regulated by the BoZ.  

Earlier this month, a spokesperson for the BoZ warned that cryptocurrencies are not legal tender in Zambia and that “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 hopes that by introducing a regulated digital currency – sometimes called GovCoins – it can increased financial inclusion, as well as improve the traceability, safety and efficiency of payment systems.

Analysts at Bank of America have previously warned that central banks which don’t introduce their own digital currency will risk losing monetary control and see demand for their currencies drop as citizens start using other countries’ digital cash.

By issuing a digital currency, Zambia would join a host of other nations including Israel, Ghana, the Bahamas, Nigeria, China and the USA.