Eswatini CBDC Focuses on Offline Capabilities, Interoperability, and Cross-Border Transfers

Eswatini, one of Africa's smallest nations, has published a paper outlining the design principles of its upcoming retail central bank digital currency (CBDC).

The Central Bank of Eswatini has published a paper detailing the design principles of its upcoming retail central bank digital currency (CBDC), to be known as the digital lilangeni.

The paper, co-published with German technology firm Giesecke+Devrient (G+D), outlines the bank's key motivations for exploring a CBDC, including providing secure access to central bank money, fostering payments digitalization, boosting financial inclusion and opening up new opportunities.

The bank has been exploring a CBDC for several years now, in partnership with G+D. Following a successful proof-of-concept (PoC) and two pilot projects, the bank has experimented with various design and implementation tweaks, arriving at a version it believes will best serve the 1.2 million Swazi.

One of the central bank's core targets with the digital lilangeni is accessibility, which has prompted it to embed offline payments into the CBDC. However, this will only be available to residents who use hardware wallets that aren't hosted by financial institutions. Hosted wallets, which will come with value-added services from the banks and payment providers, are only accessible online.

To further boost accessibility, the bank intends to make the functional design simple and suited to all Swazi.

“From a consumer perspective, the usage of Digital Lilangeni needs to be as easy and intuitive as possible. Consumers should be able to make a payment in fewer and simple steps familiar to them and with no need for advanced digital literacy,” it said in the paper.

Most other aspects of the digital lilangeni conform to global CBDC norms, the paper reveals. These include pseudo-anonymity that balances privacy and compliance, allowing the exemption of Know Your Customer (KYC) and anti-money laundering (AML) for smaller transactions. It also involves no interest payments and a holding cap (not yet set) to prevent commercial bank disintermediation.

Like most of its peers, the Eswatini central bank selected a distributed and permissioned database, where it retains control, over distributed ledger technology like blockchain.

Despite the elaborate design recommendations, the bank clarified that it has not yet decided to issue a CBDC. This has been a popular caveat that central banks append to CBDC research to indicate that while the technology side has advanced, a digital currency also requires legislators to lay the foundation before central banks can proceed.

In the United States, Jerome Powell said earlier this year that the U.S. Fed is “nowhere near recommending, let alone adopting” a digital dollar despite its continued research and PoCs. The Bank of England (BoE) reiterated this message, telling legislators that “no final decision has been made” on a digital pound.