The Central Bank of Egypt (CBE) is mulling over the prospects of rolling out a digital version of its currency to increase financial inclusion among its unbanked population.
The CBE’s plan to launch a central bank digital currency (CBDC) follows the release of a new economic government strategy, according to local news outlet Egypt Today. Designed to run from 2024-2030, Egypt’s banking regulator is expected to pursue a CBDC pilot to identify the ideal strategy for a national launch.
Previous financial stability reports released by the CBE suggest that the country’s attempt to issue a CBDC will focus on the retail side of things to supplement cash use. The pilot will see the CBE collaborate with leading commercial banks and blockchain firms to explore a retail CBDC.
The banking regulator says its foray into a CBDC may boost the country’s economy. A growing number of citizens are turning to foreign-based stablecoins and other digital currencies to hedge their wealth from inflation, a trend that Egyptian regulators say could have unintended economic consequences.
Critics say the proposed launch of a CBDC in 2030 may be too late for the central bank regulator to rein in on “cryptoization,” with a cross-section of pundits calling for a sense of urgency. However, there are fears that a frenetic approach to launching CBDCs may upend the delicate balance of Egypt’s financial ecosystem.
Egyptian financial authorities are currently interfacing with the Bank for International Settlements (BIS) and the International Monetary Fund (IMF) for technical and policy direction for an e-pound. Furthermore, Egypt can draw inspiration from countries with functional CBDCs, like Jamaica and Nigeria, nations with similar economic indices.
With Egypt inching toward a push to join the BRICS coalition, odds for a concerted effort to develop a CBDC with cross-border functionality are high, given the coalition’s planned pivot from the U.S. dollar.
BRICS founding members Brazil, India, Russia, and China are moving toward a mainstream CBDC launch in the coming years, and successful launches could see Egypt join the fray with its proposed retail offering.
A slew of benefits
Experts have highlighted a trove of benefits for Egypt stemming from the launch of a CBDC, including increased financial inclusion and healthy competition in the local payments ecosystem.
Amid dwindling cash usage in the country, an Egyptian CBDC may be used to complement cash while still offering advanced privacy features. Other perks include reduced settlement times and transaction costs for citizens, cross-border payments and programmability use cases, and utilities in the disbursement of grants and other incentives.
Egypt’s six-year plan, revolving around CBDCs, seeks to improve financial inclusion for citizens older than 16 by 100% from lows of just under 70%.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: CBDCs are more than just digital money
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