Eswatini to Develop Retail CBDC

Authorities of the Kingdom of Eswatini in Southern Africa reported the success of their pilot project for a retail central bank digital currency (CBDC). The initiative aims to improve domestic access to financial services and facilitate cross-border trade.

The Central Bank of Eswatini (CBE), a small African kingdom of 1.2 million people located between Southern Africa and Mozambique, published a document outlining the design of a retail CBDC, the digital lilangeni. The design was developed with the help of security tech company Giesecke+Devrient and underwent initial pilot testing.

Eswatini’s CBDC project is based not on distributed ledger technology (DLT) but a distributed database managed by the CBE. The digital currency will be distributed through banks, and the CBDC structure will ensure user anonymity and privacy while complying with KYC and AML requirements.

As part of the pilot, the CBE tested scenarios for the CBDC potential launch in the country and explored key infrastructure features of the digital lilangeni. Options explored included an online wallet managed by financial institutions and an offline solution in the form of smart cards that work without internet access. 

Digital payments in lilangeni will support programmability to automate transactions and limit spending, such as controlling purchases by children. Among the main obstacles to the initiative’s implementation, the paper cites low awareness among local bank staff and the need for their training before the launch.

Cash remains the dominant payment method in Eswatini, although the country offers several digital financial services. However, these services aren’t popular among the local population, making the introduction of the retail CBDC in Eswatini a strategic objective for the country’s development. The digital lilangeni is expected to enhance domestic access to financial services and facilitate cross-border trade through compatibility with existing electronic payment systems and international standards.

Over 100 countries around the world are engaged in the development of CBDCs in 2024, each taking different approaches to the introduction of digital currencies. For example, Australia abandoned the idea of launching a retail CBDC, France and Hong Kong are focused on wholesale versions, and Canada doesn’t plan to launch a CBDC in the country, opting instead to advance national payment systems.