To no one’s surprise, central bank digital currencies aren’t going away. Some countries are bolder than others on this front, which is somewhat expected. Nigeria plans to conduct a digital currency pilot in October, which will be interesting to behold.
A Bold Move By Nigeria
Ever since the concept of central bank digital currencies came to light, there has been a lot of speculation. No one in the Western world seems eager to take the plunge and maintains a wait-and-see attitude. Not too surprising, as the idea or technology has never been tested in a real-world environment, let alone undergone peer review or validation by anyone else. It may very well be a fad that will disappear into obscurity sooner rather than later.
Despite the challenges the creation of central bank digital currencies presents, some countries remain interested. That is unfortunate, as a digital currency issued by a central bank will not offer consumers or companies any more freedom than the current system does. Instead, it might make things even worse, as even more financial data can be harvested by the people who shouldn’t need it in the first place.
Nigeria currently plans to conduct a central bank digital currency trial in October of 2021. CBN has confirmed the plan of action. Apparently, its CBDC has been in development since 2017 and goes by the code name “Giant”. Hyperledger’s Fabric blockchain powers it, but no further details are known at this time. CBN believes this digital currency will facilitate growth in cross-border trade and domestic payment efficiency.
Project Giant is not the first of central bank digital currencies to become operational in Africa. South Africa has a digital Rand, and Ghana uses the e-cedi. Both projects have been around for a little while, although it remains unclear how long they will remain active. Contrary to what policymakers may want to believe. CBDCs have no guaranteed future. Not everyone wants to remain a slave to central banking, after all.
A Forced Process Won’t Work
The switch to this CBDC is not entirely surprising. A few months ago, the CBN forced all financial institutions across Nigeria to stop providing services to cryptocurrency firms and projects. As the financial growth cryptocurrencies can provide to the Nigerian economy is far greater than any threat it could pose, a weird and silly decision can provide to the Nigerian economy. Purposefully opposing innovation and financial freedom is counterproductive.
Any bank in Nigeria refusing to comply with those forced guidelines would face strict sanctions. Following China’s example in cryptocurrency matters is not ideal for any self-respecting nation. Additionally, this raises concerns over how banks will be forced to embrace this latest in a list of central bank digital currencies or face similar sanctions. That is one way of enforcing adoption, yet it solves none of the country’s financial problems.
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