ESWATINI ALLOWED TO ISSUE DIGITAL CURRENCIES

MBABANE – The International Monetary Fund (IMF) has revealed that Eswatini is one of the few African countries that are allowed to issue digital currencies under existing laws.

The  IMF has come out with  a report showing that close to 80 per cent of the world’s central banks are either not allowed to issue a central bank digital currency under existing laws, or the legal framework is not clear. Online sources that include Investopedia define digital currency as any means of payment that exists purely in electronic form. Digital currencies exhibit properties similar to other currencies, but do not have a physical form of banknotes and coins. Not having a physical form, they allow for nearly instantaneous transactions. These types of currencies may be used to buy physical goods and services, but may also be restricted to certain communities such as for use inside an online game. One type of digital currency is often traded for another digital currency using arbitrage strategies and techniques.

Centralised

Digital money can either be centralised, where there is a central point of control over the money supply, or decentralised, where the control over the money supply can come from various sources. The report lists only about 40 countries legally allowed to issue digital currencies, out of which, five are African-based. The five African countries on the list are Eswatini, Ghana, Madagascar, Tunisia and South Africa. In order to issue a digital currency, a detailed analysis of the functions and powers of each central bank, as well as the implications of different designs of digital instruments in each jurisdiction, was reviewed.

Jurisdiction

The paper looked at the different laws and regulations in order to build a case for digital currencies in each jurisdiction. These include that the digital currency can easily be received and used by the majority of the population – similar to banknotes and coins; the digital infrastructure is in place – laptops, smartphones, connectivity exist without imposing these on the citizens; as well as the legal implications of the main concepts being considered – account-based or token-based and how the balances currently held on central banks books are digitised or how the token is designed without connecting it to commercial banks.

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