The National Bank of Ethiopia (NBE) has begun formally studying Central Bank Digital Currencies (CBDCs) as part of a broader push to prepare the country’s financial system for an increasingly digital future, even as it insists that cash will remain part of the monetary landscape for decades to come.
Governor Eyob Tekalign said the central bank is now examining possible models for a “central bank retail currency” and the implications of issuing a digital birr, in line with global trends where more than 100 countries are exploring or piloting CBDCs. He stressed that the work is still exploratory, noting that “we don’t know exactly what it means, but we really need to study it,” as central banks worldwide adapt to new forms of money, including stablecoins and other digital instruments.
According to experts, CBDCs are digital forms of a nation’s fiat currency issued and backed by a central bank, designed to operate alongside cash and provide a regulated alternative to private cryptocurrencies and stablecoins. The NBE’s draft National Digital Payments Strategy and the new central bank proclamation are understood to give the bank a mandate to issue and regulate such a “digital birr” as part of Ethiopia’s wider Digital Ethiopia 2025 agenda.
Despite rapid growth in digital payments, Governor Eyob downplayed the prospect of a fully cashless society in the next two to three decades, citing Ethiopia’s large informal and rural economy. He said the most likely outcome is a “hybrid and layered” system in which digital transactions grow exponentially while a “favorable environment” remains for cash, especially in segments where connectivity, literacy and infrastructure are limited.
Stablecoins led by technology firms are already emerging as de facto cross-border currencies, alongside instruments such as IMF Special Drawing Rights (SDRs) and regional currency initiatives like those discussed within BRICS, adding pressure on central banks to respond with their own digital options. Eyob warned that managing this shift is particularly challenging for regulators in developing economies, where they must balance innovation with financial stability, monetary sovereignty and consumer protection.
Supporters argue that a CBDC could expand financial access, improve the transparency of payments and strengthen the transmission of monetary policy, especially in countries where mobile and online payments are racing ahead of traditional banking. Ethiopia’s policymakers see digital currency as one tool—alongside interoperability directives and expanded digital ID—that could help reduce cash usage and deepen formal financial participation.
However, analysts also warn that a poorly designed CBDC could concentrate data and oversight in the hands of the state, raising concerns about privacy and potential overreach in monitoring transactions. The governor has repeatedly highlighted cybersecurity, legal harmonization and data sovereignty as critical preconditions, saying the transition to a more digital economy “will bring a new level of difficulties” if domestic laws and systems are not aligned.
As digital payments increasingly flow across borders, Eyob said Ethiopia must strike a careful balance between using new tools to enhance regional and global connectivity and preserving sufficient control over its data and currency. He suggested that central bank digital currencies and ideas of easily convertible common currencies might eventually support African financial integration, but only once underlying issues like regulatory convergence, convertibility and governance are addressed.
