Kingdom

Bank

The Central Bank of the Kingdom of Eswatini, a landlocked country of 1.2 million people sandwiched between South Africa and Mozambique, released a design paper describing its potential central bank digital currency (CBDC), the digital lilangeni.&nbsp;
The digital lilangeni would be a tokenized retail CBDC run on a distributed database, rather than a distributed ledger. Blogger and CBDC consultant John Kiff recently&nbsp;<a data-ct-non-breakable="null" href="https://kiffmeister.com/2024/10/10/kiffmeisters-fintech-daily-digest-20241010/" rel="null" target="null" text="null" title="null">commented</a>&nbsp;on the design paper.
<h2 id="a-cbdc-tailored-to-eswatini-s-specific-needs">A CBDC tailored to Eswatini’s specific needs</h2>
The CBDC would have hosted online wallets&nbsp;managed by financial institutions and hard wallets, most likely in the form of a smart card, that could function in the absence of internet access, according to the design&nbsp;<a data-ct-non-breakable="null" href="https://www.centralbank.org.sz/wp-content/uploads/2021/04/2024-Fintech-Digital-Lilangeni-Design-Paper.pdf" rel="null" target="null" text="null" title="null">paper</a>.
The digital lilangeni would be intermediated, with financial institutions distributing the currency to users through infrastructure operated by the central bank. The CBDC would feature pseudo-anonymity that would preserve privacy without compromising Know Your Customer and Anti-Money Laundering requirements.&nbsp;&nbsp;
Digital lilangeni payments would be programmable at the wallet level to enable automated payments or place restrictions on children’s spending, for example.
<figure>
 <img alt="African nation of Eswatini releases design for tokenized retail CBDC" src="https://s3.cointelegraph.com/uploads/2024-10/01927858-9875-7546-adfc-ebe6006bed4c" title="">
 <figcaption style="text-align: center;">
 Two-tiered governance of the digital lilangeni. Source: <a data-ct-non-breakable="null" href="https://www.centralbank.org.sz/wp-content/uploads/2021/04/2024-Fintech-Digital-Lilangeni-Design-Paper.pdf" rel="nofollow noopener" target="_blank" text="null" title="https://www.centralbank.org.sz/wp-content/uploads/2021/04/2024-Fintech-Digital-Lilangeni-Design-Paper.pdf">Central Bank of Eswatini</a>
 </figcaption>
</figure>
<h3 id="eswatini-s-cbdc-in-context">Eswatini’s CBDC in context</h3>
Cash remains the dominant form of payment in Eswatini despite the central bank’s efforts to advance a “cash-lite” society and the growth of digital financial services like mobile money and bank cards. The central bank decided to phase out checks in 2022.&nbsp;
Interoperability will be a key issue for the digital lilangeni, which is pegged to the South African rand and must function within the existing electronic money framework and international standards.
<figure>
 <img alt="African nation of Eswatini releases design for tokenized retail CBDC" src="https://s3.cointelegraph.com/uploads/2024-10/0192785a-0ce7-7a7d-8b70-5ac02a481de5" title="">
 <figcaption style="text-align: center;">
 Source: <a data-ct-non-breakable="null" href="https://x.com/imfcapdev/status/1823732408921022641" rel="nofollow noopener" target="_blank" text="null" title="https://x.com/imfcapdev/status/1823732408921022641">IMF Capacity Development</a>
 </figcaption>
</figure>
The CBDC was designed with Giesecke+Devrient using its Filia CBDC technology and has already been subjected to proof-of-concept and one sandboxed and one live pilot project. Staff training was a source of delay in the projects and would have to be addressed on a larger scale if the CBDC were to be implemented.
Related:&nbsp;<a data-ct-non-breakable="null" href="https://cointelegraph.com/news/hong-kong-launches-ehkd-plus-tokenization" rel="null" target="null" text="null" title="null">Hong Kong’s e-HKD project expands into tokenization, programmability</a>
The Eswatini CBDC proposal&nbsp;<a data-ct-non-breakable="null" href="https://cointelegraph.com/news/rwanda-bnr-retail-cbdc-feasibility-study" rel="null" target="null" text="null" title="null">resembles Rwanda’s envisioned digital</a>&nbsp;currency. Like Rwanda’s digital franc, the Eswatini CBDC would be token-based and operate on a distributed database, which the Rwandans expected to be more reliable than a blockchain.&nbsp;
In addition, the Rwandan and Eswatini CBDCs feature programmability, which is looked at with disfavor in the global North, but could provide advantages in less developed economies. In Kazakhstan, for example, programmable CBDC&nbsp;<a data-ct-non-breakable="null" href="https://cointelegraph.com/news/kazakhstan-digital-tenge-rail-project-china-pilot" rel="null" target="null" text="null" title="null">is seen as a tool to battle</a>&nbsp;corruption.&nbsp;
Magazine:&nbsp;<a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/digital-yuan-adoption-payments-regulation/" rel="null" target="null" text="null" title="null">How the digital yuan could change the world… for better or worse</a>
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African nation of Eswatini releases design for tokenized retail CBDC

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