RBZ Plans A Retail CBDC

The RBZ has confirmed plans to release a retail central bank digital currency (CBDC).

A key question with any CBDC issuance is, what are the motivations? RBZ deputy governor Kupikile Mlambo during a zoom meeting last week on cryptocurrency hosted by the Zimbabwe Economics Society, said the first goal of its CBDC will be financial inclusion. It also wants to provide more fast payments options and ensure the economy is efficient and interoperable. The central bank is now working on introducing digital currency as part of the basket of solutions to stabilise the local currency.

“We are saying as central bankers, we need to give people an alternative digital currency. And central banks have settled on what we call a central bank digital currency (CBDC)…” RBZ deputy governor Kupikile Mlambo said.

“A central bank digital currency — I can tell you today that almost 86% of central banks are pursuing this venture of a central bank digital currency, 60% are experimenting, 14% are at a pilot stage and in Africa we have one who has actually launched a CBDC, that is Nigeria with the ‘eNaira’.

“Ourselves in Zimbabwe, we have also decided to adopt a CBDC. We are at the research stage right now and we shall be moving to the design stage in the next few weeks. We have within the central bank a team of young people who form what we call the ‘Think Tank Unit’ which is operating right now. They are both in technology, economics and in legal because we want to cover all these areas of the CBDC.”

Research conducted by the private sector, including several OMFIF members, frequently points to the unease of citizens in many countries about the threat to liberty posed by a central bank monitoring their transactions in real time. How real is this eventuality and does it really matter?

If we assume that a CBDC will be a digital representation of a fiat currency backed by a central bank, issued to citizens and small businesses via accounts held and managed by private sector institutions and limited in scale, we see something that closely resembles the existing management of private money current (checking) accounts operated by the banking system.

Currently, if you have a bank account, in theory the provider can monitor your transaction activity on a real-time basis. In most countries there is a legal process which permits public authorities access to that information if due cause can be shown. There is a comprehensive and systematic framework of legal and regulatory measures balancing individual rights of privacy and the authorities’ legitimate needs for transparency. It is unlikely that the framework accompanying CBDCs would be much different. In other words, it is hardly the advent of an Orwellian regime.

It is undoubtedly true that, in countries with a more restrictive view of citizens’ rights to privacy, similarly intrusive standards will be applied to CBDCs. But that is an intrinsic feature of the political system rather than the CBDC. Similarly, in countries that once routinely abused the collection and use of data on citizens for the purposes of state control, there are concerns that CBDCs might be the precursor to unwelcome public intrusion into private affairs. In many of those states citizens now have the right to eject unwelcome governments via the ballot box.

In truth, citizens in many countries willingly surrender vast amounts of personal data to private sector suppliers of financial services, consumer goods of all descriptions, social media and romantic liaisons among other essentials.