Ethiopia embraces central bank digital currency under its new National Bank Proclamation, aiming for transparency and financial inclusion — but concerns over privacy, control, and readiness persist.
By Cherenet Daba
The Dawn of Digital Money
Money is changing. We have moved from gold coins to banknotes, and from debit cards to mobile wallets. The newest shift is Central Bank Digital Currencies (CBDCs). These are digital versions of national currency issued by the state, meant to make transactions faster, cheaper, and traceable. Unlike cryptocurrencies like Bitcoin, which are decentralized and unregulated, CBDCs are fully managed by central banks. Each digital unit is a direct claim on the state, making it the most official kind of digital money so far. Countries around the world are looking into CBDCs to update their economies and improve monetary policy. China’s Digital Yuan is leading the way, with pilot projects also happening in the EU, India, and the U.S. According to the IMF, more than 130 countries are now researching or developing CBDCs.
“Money won’t create success, the freedom to make it will.” – Nelson Mandela
How the Concept Emerged
CBDCs started as a response to two trends. First, private digital currencies like Bitcoin and stablecoins emerged, challenging central banks’ control. Second, economies underwent digital transformation, causing traditional banking systems to fall behind mobile and online payments. Central banks saw that without innovation, they could lose their monetary authority. A CBDC helps the state keep control while updating money itself, bridging the gap between fiat and digital finance.
“Technology is a double-edged sword. It can either empower or enslave us.” – Elon Musk
Promise and Purpose
Advocates say CBDCs can improve payment efficiency by enabling instant, low-cost transactions. They also promote financial inclusion by allowing anyone with a phone to hold a digital wallet. CBDCs can increase transparency and reduce corruption by digitizing transactions. Additionally, they can strengthen monetary policy through real-time liquidity management. Furthermore, CBDCs can support innovation by creating a foundation for Fintech growth. For developing economies, these features are especially transformative. They can bring millions into the financial system, reduce reliance on cash, and help fight money laundering and tax evasion.
Africa’s Digital Experiment
Across Africa, countries are testing CBDCs to tackle long-standing financial issues. Nigeria launched the eNaira in 2021. Ghana, South Africa, and Kenya are running pilot programs. For many African nations, the goal is clear: they want to formalize the large informal economies that dominate local trade. Over 60% of African transactions happen outside the formal banking system. CBDCs, which are linked to mobile payment platforms, could change this situation. However, risks are present. In areas with weak digital infrastructure or strict governments, CBDCs might increase surveillance and financial exclusion instead of resolving these problems.
“Seek ye first the political kingdom.” – Kwame Nkrumah.
Ethiopia’s Step into the Digital Era
Ethiopia’s new National Bank Proclamation (2025) allows the National Bank of Ethiopia (NBE) to issue and regulate a central bank digital currency, informally called the “Digital Birr.” This move is part of the government’s Digital Ethiopia 2025 strategy, which aims for a cash-light economy driven by technology. The Digital Birr is expected to work alongside physical currency and may connect to national ID systems and mobile wallets.
Ethiopia’s situation makes this step both timely and complicated. The informal economy dominates trade. Corruption and cash transactions weaken transparency. Financial inclusion is low, especially in rural areas. Technological capacity is limited, and there are gaps in digital literacy. Additionally, political centralization raises concern about surveillance and control. If handled well, the CBDC could transform Ethiopia’s economy. If not, it could worsen existing inequalities and fears.
The Blessings: Promise for a New Economy
Ethiopia can benefit in many ways. Digital records can lower under-the-table deals and improve oversight in public spending. They can also formalize the economy by tracking transactions that currently avoid taxes. A mobile-based CBDC could serve millions of people who do not have access to traditional banks. This would allow for efficient monetary policy and real-time adjustments by the NBE. Moreover, a well-executed digital currency could boost local innovation and fintech development, leading to job creation and technological progress.
“A people without knowledge of their past is like a tree without roots.” – Marcus Garvey.
The Curses: Between Surveillance and Suppression
Digital transformation without freedom can become a trap. Government access to every transaction could stifle dissent and limit personal freedom. Poor connectivity or low literacy might exclude rural populations. Centralized control could allow the freezing or monitoring of citizens’ funds during political disputes. Limited cybersecurity could put the system at risk of major breaches. Additionally, public distrust could increase if the system is not transparent.
“Freedom is never voluntarily given by the oppressor; it must be demanded by the oppressed.” – Martin Luther King Jr.
Balancing Control and Confidence
For CBDC to succeed in Ethiopia, trust is essential. The National Bank must ensure strong data protection laws to protect user privacy, create independent oversight to prevent abuse of power, and start public education programs to improve digital literacy and acceptance. Working with private banks and Fintechs will also be important.
“Trust is the currency of the future.” – Jack Ma.
The Verdict: Between Hope and Hesitation
Ethiopia’s CBDC is an important step in its financial history. It offers transparency, inclusion, and modernization. However, it also risks becoming a tool for surveillance and centralization. Its success relies not just on technology but on governance, transparency, and public trust. The Digital Birr could either empower the people or strengthen the state. This choice will shape Ethiopia’s digital future.
“The future belongs to those who prepare for it today.” – Malcolm X.
Cherenet Daba is Principal Auditor at Zemen Bank & Business Advisor he can be reached via Cherinetdaba4@gmail.com or Cherenet.Daba@zemenbank.com
