Ethiopia embraces digital currency: CBDC law approved alongside bitcoin mining push

Ethiopia's financial sector is undergoing a major transformation. The Council of Ministers recently greenlit a legal framework for a central bank digital currency (CBDC) while simultaneously pursuing policies to attract bitcoin miners.

This move comes amidst wider economic reforms in the country. The draft CBDC law will now be reviewed by the government-dominated parliament. The National Bank of Ethiopia (NBE) announced the approval of two key proclamations on June 14th, aiming to modernize and liberalize the financial landscape.

Interestingly, despite classifying digital currencies like Bitcoin as illegal, Ethiopia has recently licensed numerous data mining companies, primarily Chinese firms, drawn in by the country's low electricity costs.

The NBE proclamation paves the way for a potential CBDC, with the bank reportedly initiating a study on its implementation in June 2024. This seemingly contradictory approach highlights the multifaceted nature of Ethiopia's digital currency strategy.

While cryptocurrencies remain outlawed, the government is embracing blockchain technology and exploring its own digital currency solution. As for Bitcoin mining, Ethiopia hopes to leverage its cheap electricity to become a global hub, attracting foreign investment.

The next step for these reforms lies with the House of Representatives, which needs to ratify the draft banking business proclamation allowing foreign banks to operate and the NBE proclamation. This move signals Ethiopia's willingness to embrace innovation in the financial sector, taking a two-pronged approach to digital currency.