A feasibility study report unveiled earlier this month identified four Sweet Spots for introducing CBDC in the country, including the need to increase resilience against possible network outages, power failures, and natural disasters; improve innovation and competition; contribute to achieving the cashless economy national initiative over time; and develop faster, cheaper, more transparent, and more inclusive cross-border remittances.

The feasibility study, which began in September 2022, also identified risks related to the adoption of the CBDC by the public, financial providers, and merchants with a high level of concern. To mitigate these risks, the study recommends additional investments in promoting CBDC and education in order to shift existing consumer habits to this new innovative product.

As the consultation process continues, many people are wondering what CBDCs are and how they differ from popular cryptocurrencies like Bitcoin.

In simple language, a CBDC is like digital cash issued by the central bank. It’s similar to regular money we use but in a digital form.

The main difference between CBDC and cryptocurrencies like Bitcoin and Ethereum is that CBDCs are issued and controlled by a country’s central bank, just like physical cash.

On the other hand, cryptocurrencies use a decentralized system for transactions and creating new units.

Because CBDCs are central bank-backed, they are considered a very secure way to hold and transfer money.

If the process to establish the digital currency sails through, Rwanda’s CBDC will be the official digital currency regulated by the National Bank of Rwanda.

“While crypto values change, Rwanda’s CBDC will always match the value of regular money,” BNR explains on its website.

Notably, the CBDC can be like a bank account (account-based) or like digital cash (token-based). Account-based CBDC links ownership to an identity and keeps records with a third party. Token-based CBDC doesn’t need a third party and is like using physical cash.

BNR affirms that CBDC will not replace existing digital payments like cards and electronic payments. However, it may offer new services and more payment options.

The ongoing consultation is aimed at getting public opinion on the Rwanda CBDC. The information will help the central bank understand the technology, regulations, and risks of the new digital money product before its rollout.

Three countries - the Bahamas, Jamaica, and Nigeria - have fully launched CBDCs, while several others are in the piloting stage.

In Nigeria, the eNaira is a central bank digital currency (CBDC) backed by law. It is the digital form of the Naira and is used just like cash.