Eswatini is one of the most advanced countries on the continent when it comes to the pursuit of a CBDC, with the South African nation recently unveiling a design paper for public discussion.
The bank says a lot of progress has been made to improve the country’s financial infrastructure, identifying developments such as mobile money and bank cards, but notes that CBDC presents an opportunity ‘to address remaining challenges and make the payment system more resilient and effective.’
Based on the design paper, the digital Lilangeni is a retail or general purpose CBDC for domestic payment transactions used by individuals to pay each other and merchants/businesses. The digital Lilangeni will enable a wide array of online and offline use cases, more efficient government-to-person (G2P), and person-to-government (G2P) payments.
Some payments and wallets that store digital Lilangeni will be equipped with programmability features for value added and innovative use case scenarios. The digital Lilangeni could also be utilised for cross-border payments, the apex bank said.
The digital Lilangeni takes into account CBDC standards which allow it to participate in intra-regional and international cross-border CBDC projects and make it interoperable with potential foreign CBDCs. Attention is paid as to how the digital Lilangeni maintains the status quo with regards to substitution and its convertibility to the South African Rand.
With the desire for simplicity and ease of use, the design paper stipulates two types of wallets for the digital Lilangeni:
- The first type is called hosted wallet that is managed by financial institutions, whilst
- The second type is a hardware wallet that is a secure and portable storage device held by individuals
Hosted wallets require access to the internet while hardware wallets work in offline environment consecutively.
When it comes to the system architecture, the Central Bank of Eswatini (CBE) follows a two-tier approach to the digital Lilangeni, where the CBE operates the core infrastructure and intermediaries are in charge of distributing CBDC to end users, once obtained from the CBE, and handle all customer-facing activities.
The two – tier approach is similar to CBDC implementations in Nigeria and Ghana. It goes without saying that the Lilangeni is built upon a distributed database, which is operated and permissioned by the CBE, so it will be centralized from a management perspective.
You can find the full paper
here.
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