Eswatini reveals design for its tokenised retail CBDC

The Central Bank of Eswatini has released a design paper outlining the structure of its proposed central bank digital currency (CBDC), the digital lilangeni. 

The tokenised retail CBDC is aimed at improving domestic accessibility and cross-border trade for the landlocked African nation of 1.2 million people. 

The currency would be intermediated, with financial institutions distributing it through online and hard wallets, the latter functioning even without internet access. 

The CBDC will be based on a distributed database rather than a distributed ledger, offering pseudo-anonymity while maintaining compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. 

According to the design paper, the digital lilangeni will be programmable, allowing for automated payments and specific restrictions, such as limiting children’s spending. 

Eswatini remains a largely cash-dependent society despite efforts to promote digital financial services. 

The introduction of the digital lilangeni is part of the central bank's ongoing initiative to create a "cash-lite" economy, building on the elimination of checks in 2022. 

The design emphasises interoperability within existing financial frameworks, as the lilangeni is pegged to the South African rand. 

The digital lilangeni was developed in partnership with Giesecke+Devrient using its Filia CBDC technology. 

The project has undergone proof-of-concept and pilot testing, though staff training issues have caused delays. 

These will need to be addressed before the CBDC can be fully implemented. 

Eswatini’s CBDC proposal bears similarities to Rwanda’s digital currency initiative, with both nations opting for a token-based approach using a distributed database. 

Programmability, a feature often viewed sceptically in developed economies, is considered a potential asset for less developed nations, where it could help combat issues like corruption.