Australia’s central bank has revealed plans to launch a one-year research programme into creating a central bank digital currency (CBDC) in the country. The research will look deeply into the potential benefits the currency might present.
A CBDC with a Goal
According to Reuters, the programme will have the Reserve Bank of Australia (RBA) in partnership with the Digital Finance Cooperative Research Centre (DFCRC), a government-backed industry group.
The project is divided into segments. They include identifying business models and ingenious use cases for the issuance of a digital currency and understanding the technological, legal, and regulatory deliberations.
There is also a plan to, during the course of the programme, develop a limited-scale CBDC pilot to operate in a fenced environment and a pilot CBDC that will be a real claim on the RBA.
What Happened to Nigeria’s CBDC, the eNaira
The move by the Australian central bank might be a revelation of the many mistakes that trailed the creation of the eNaira.
On Monday, October 25, 2021, Nigeria became the first African country to introduce a digital currency, calling it the eNaira. Although the digital currency was expected to be a game-changer in the financial sector of the country, it seemed unlikely, even to the untrained eye, that that would be the case. The reasons were not farfetched.
For starters, it was the last thing the country needed. The nation’s economy was and is still struggling, and a CBDC was not the solution to the struggle, as there were no real use cases. Though expected to serve the unbanked, it came with features which could further serve to discourage them from trying to be a part of the financial inclusion it promised. Instead of helping the economy, it briefly gave citizens something else to worry about, wondering if its usage would be enforced.
Secondly, its introduction came across as hypocritical at best and delusional at worst. How? The CBDC was introduced a few months after the Central Bank of Nigeria (CBN) banned cryptocurrency trading in Nigeria. Seeing that many Nigerians interpreted the ban as a lockdown on crypto assets, introducing a digital currency came across as confusing.
Thirdly, the average Nigerian citizen does not trust the government. The government and the CBN have appeared to destroy whatever enabling environment the citizens create for themselves to survive the undeniable economic hardship, and so at this time of distrust, bringing a currency backed by the CBN could only have produced a reaction of wariness and avoidance.
The Right Question and a Real Use Case
Almost a year after its unveiling, the eNaira seemed to be stuck at the pilot rollout (educate and inform) stage, as there seemed to be no real use cases with which its adoption could be encouraged.
The final reason why the eNaira was probably dead on arrival, though here to stay, is that a house divided against itself cannot stand.
According to restoftheworld.org, on the subject of the need for the eNaira, the CEO of a leading Nigerian bank asked a significant question, “How is it superior to the existing money and payments system?”
An essential question asked by every true developer, founder, and creative around the world is, “How is it superior to the existing solutions?” It might also be the one question the CBN didn’t ask.
The Australian central bank has, apparently, asked itself this question, as it plans to invite industry participants to develop specific use cases that will demonstrate how a CBDC can be used to provide innovative and value-added payment and settlement services to households and businesses.
If the Nigerian tech ecosystem is to serve and be relevant, it has to ask the right questions and employ world-class practices and trends or it will keep playing catch up. Until the eNaira brings something different to the table, it will just be another app in the Google Play Store and App Store.