Zanzibar government opens blockchain sandbox to encourage tech startups

The semi-autonomous region of the United Republic of Tanzania is calling its sandbox the National Blockchain Sandbox.

The government of Zanzibar has opened a blockchain sandbox to encourage tech startups, local press reported on Monday.

The semi-autonomous region of the United Republic of Tanzania is calling its sandbox the National Blockchain Sandbox. It will allow developers to test innovative technologies on the National Blockchain Network.

According to the report by Kenyan Wall Street, priority will be given to projects that feature financial inclusion, identity verification and certification issuance.

Those admitted to the sandbox will have the added potential benefit of being a part of government-sponsored training and incubator programs.

“The sandbox was designed by Dubai-based LedgerFi IT and will operate on the EVM-compatible layer-1 XDC network,” the report added.

The Bank of Tanzania (BOT) introduced a legal framework for fintech sandboxes in July following a year of preparations. The regulations include eligibility requirements and application procedures and stipulate a nine-month testing period.

There are about 75 fintech startups in Tanzania. In 2023, 24.4 million people, or 72% of Tanzanian adults, used mobile money services, compared to 7.5 million people, or 22%, who used commercial bank services. A total of 18.7% of the population was considered “financially excluded.”

The BOT warned against using or trading cryptocurrency in 2019, saying the Tanzanian shilling is the country’s only legal tender. However, there are no regulations on crypto use and, as of 2023, 1.7% of Tanzanian adults had invested in cryptocurrencies and 9.7% were aware of them.

“Tanzanian authorities have been gradually introducing blockchain technology into the country’s financial system,” the report noted.

“However, in June, Tanzanian think tank Governance & Economic Policy Centre noted in a report that the government has been hesitant to fully embrace cryptocurrencies due to concerns over money laundering, terrorist financing and the potential impact on the country’s monetary sovereignty.”

Zanzibar reportedly considered adopting cryptocurrency independently of the national government in 2021, after Tanzanian President Samia Suluhu Hassan expressed support for it.

The BOT considered issuing a central bank digital currency but remained “cautious” about it after concluding research in 2023. The central bank announced a second round of research in June.