The Bank of Uganda (BOU) has launched a study to explore the possibility of issuing a digital currency. However, executives at the institution have warned that the central bank should clarify in advance why it should have it.
The Central Bank of Uganda has begun studying the feasibility of issuing CBDCs for use by households and businesses. The BOU is also reportedly considering changes to the country's economic laws. This action would allow the BOU to formally adopt CBDCs.
CBDC representatives supported the Central Bank's decision, arguing that this digital currency would allow the people of Uganda to transfer money cheaply and quickly.
However, the bank's executive director, Charles Abka, warned in a recent interview that the BOU should know exactly why the CBDC needs to be activated. He said.
First, it is important to properly identify what the fundamentals are, why we must have it, and what problems it will help us solve.
Abuka believes the CBDC issue could make "technical sense. He said the technical architecture of such digital currencies is costly, and central banks need to understand the implications of those costs. He also noted that digital currencies are vulnerable to cyber attacks.
Despite the concerns expressed by the BOU, Noah Baalessanv, a blockchain consultant and one of Uganda's digital currency representatives, said that allowing CBDC would help the central bank understand the "real economy. Baalessanv added that unlike dealing with an expensive and opaque monetary economy, CBDC would further allow central banks to track transactions.
However, the blockchain consultant also warned that any problems with CBDC could lead to financial institutions being removed from the banking equation. Baalessanv argues that distributing digital currency directly to consumers is more efficient, which could also be the "most dangerous" feature of CBDCs.
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