REGULATION | Ethiopia’s Council of Ministers Approves Major Financial Sector Reforms including Establishment of CBDC Regulatory Framework

According to a post by the National Bank of Ethiopia, the country’s Council of Ministers has approved 2 major laws that are set to bring further liberalization and modernization of the country’s financial sector.

 

The Council of Ministers today approved the draft NBE Proclamation and Banking Business Proclamation https://t.co/rxRw1Ub3Gx pic.twitter.com/522G3GpIZK

— National Bank of Ethiopia (@NBEthiopia) June 14, 2024

The two bills that still need to be ratified by the House of Representatives are the draft banking business proclamation, which allows granting foreign banks with licenses to operate in Ethiopia and National Bank of Ethiopia (NBE) proclamation.

Among other things, the NBE proclamation establishes a legal framework for the introduction of a central bank digital currency as necessary. According to an earlier report, the National Bank of Ethiopia (NBE) is set to initiate a study on the use of a Central Bank Digital Currency (CBDC in June 2024.

The Ethiopian central bank classifies digital currencies, including Bitcoin and other cryptocurrencies, as illegal but the government has recently licensed dozens of data mining firms, many from China, looking to Ethiopia as a base of operations for its low electricity tariffs.

 

Chinese #Bitcoin Miners Shift Focus to #Ethiopia After 2021 Beijing Ban

Despite #Ethiopia’s ban on cryptocurrency trading, it permitted #Bitcoin mining from 2022 onward.https://t.co/H8eXHU2tZ9

— ₿itcoin Xoe 🇭🇹 (@Bitcoin_Xoe) March 23, 2024

The banking business proclamation itself allows granting foreign banks with licenses to operate in Ethiopia. Ethiopia’s banking industry is dominated by the state-owned Commercial Bank of Ethiopia, with a total of 32 locally-owned banks in the sector.

The decision comes nearly two years after the Prime Minister Abiy Ahmed’s cabinet adopted a policy to open the banking sector to foreign investors, as reported by BitKE.

 

Ethiopia🇪🇹 Opens Local Banking Sector to Foreign Players 🏦

Currently, atleast 18 local commercial banks are reportedly operating in Ethiopia’s banking sectorhttps://t.co/Nsr1dneP3J

— BitKE (@BitcoinKE) September 17, 2022

The Central Bank has been making legislative changes to implement a new policy and plans to issue up to five banking licenses to foreign investors over the next five years, local reports indicate. This includes amending the Banking Business law which was discussed by the ministerial council on June 14 2024.

According to a statement from the Prime Minister’s Office, the draft law was prepared in response to recent economic and technological developments in the global financial industry, as well as the policy change. It establishes a legal framework and control mechanisms for issuing banking licenses to foreign investors and managing the process.

Under this law, foreign investors can enter the banking business by opening foreign bank subsidiaries, branches, or investing in shares of existing domestic banks. Representatives of foreign banks will be regulated by the National Bank.

The council unanimously voted to endorse the draft laws and forward them to parliament for ratification.