Date: 19 June, 2024
In a significant move towards embracing digital finance, Ethiopia’s cabinet has approved a legal framework for the establishment of a central bank digital currency (CBDC). This development coincides with the government’s strategic efforts to position Ethiopia as a global hub for bitcoin mining. The draft law, now set to be reviewed by the lower chamber of parliament, aligns with the government’s broader economic reform agenda.
The approval of the CBDC legal framework marks a pivotal step in Ethiopia’s financial modernization efforts. On June 13, the Council of Ministers passed two crucial pieces of legislation: the National Bank of Ethiopia Proclamation and the Banking Business Proclamation. These laws are designed to overhaul the financial sector and integrate digital currencies into the national economy. The proposed CBDC framework is now headed to the House of Peoples’ Representatives, where the ruling Prosperity Party holds a majority. Given this political dominance, the legislation is expected to pass smoothly through the lower chamber. The establishment of a CBDC is anticipated to enhance financial inclusion, streamline payment systems, and reduce the costs associated with currency management.
Ethiopia’s venture into the realm of digital currencies comes as part of a broader set of economic reforms aimed at revitalizing the nation’s economy. The government’s comprehensive strategy includes policies to attract global bitcoin mining operations to Ethiopia. By leveraging the country’s abundant renewable energy resources, such as hydroelectric power, Ethiopia aims to become a competitive player in the cryptocurrency mining industry. The dual focus on CBDC development and bitcoin mining reflects Ethiopia’s ambition to harness the benefits of digital finance and blockchain technology. The introduction of a CBDC is expected to facilitate more efficient and secure financial transactions, while the promotion of bitcoin mining is geared towards generating new revenue streams and fostering technological innovation.
The move to develop a CBDC is aligned with global trends, as central banks around the world explore digital currencies to improve the efficiency of monetary systems and enhance financial stability. For Ethiopia, a CBDC represents a leap towards modernizing its financial infrastructure and ensuring that its monetary policy is equipped to handle the challenges of the digital age.
The government’s push for bitcoin mining also signals a forward-thinking approach to economic diversification. By attracting international mining operations, Ethiopia hopes to capitalize on the growing demand for cryptocurrencies and the increasing importance of blockchain technology. The influx of mining businesses is expected to create jobs, stimulate technological advancements, and boost the local economy.
Key Points:
- Ethiopia’s cabinet approves CBDC legal framework.
- Pursues policies to become a global bitcoin mining hub.
- Draft law set for review by Prosperity Party in parliament.
- Part of broader economic reforms.
- Council of Ministers passed the National Bank of Ethiopia Proclamation on June 13.
- Proclamation allows NBE to introduce CBDC alongside fiat currency.
- NBE considered development, policy, technology, and international best practices.
- Ethiopian Central Bank to launch CBDC as part of reform agenda.
Reference:
https://www.centralbanking.com/fintech/cbdc/7961494/ethiopia-approves-cbdc-law-as-it-pursues-bitcoin-mining-policies