China’s Central Bank Digital Currency: A New Force in African Finance?

The document explores the transition from electronic money to CBDCs, focusing on China's e-CNY as a tool for renminbi internationalisation and its potential impact on Africa. It details the technical differences between cryptocurrencies and CBDCs, the specific two-tier design of the e-CNY, and the risks associated with privacy and financial disintermediation. For Africa, the paper highlights opportunities for financial inclusion and more efficient remittances, while cautioning against the risks of digital divide and state surveillance. It concludes with recommendations for African civil society and policymakers to engage in the design and standard-setting of digital currency frameworks to maintain monetary autonomy.

• Central Bank Digital Currencies (CBDCs) differ from cryptocurrencies in that they are "controlled and tracked by a national central bank" and serve as "legal tender," whereas cryptocurrencies are typically decentralised and volatile.
• China's e-CNY is designed as a "digitisation of the RMB" and operates on a two-tier system where the People's Bank of China (PBoC) issues the currency to designated operators, who then provide services to the public to avoid "financial disintermediation."
• The e-CNY is intended to replace cash in circulation (M0) rather than bank deposits (M1 or M2), and it is designed to be non-interest-bearing and cost-free in its provision.
• China is using the e-CNY to promote the internationalisation of the renminbi through projects like mBridge, which involves the PBoC, the Hong Kong Monetary Authority, and the central banks of Thailand and the UAE.
• In Africa, Nigeria became the first country to launch a CBDC (the eNaira) in October 2021 to increase financial inclusion and facilitate remittances, though its implementation faced public protests due to cash shortages.
• CBDCs offer African nations the potential to reach the approximately 350 million people without formal financial access and to reduce the cost and increase the speed of cross-border remittances.
• The adoption of CBDCs introduces significant risks regarding privacy and state control, with concerns that they could be used to "monitor transactions and even personal behaviour" or impose political objectives.
• The Pan-African Payment and Settlement System (PAPSS), based in Cairo, Egypt, may eventually support the use of CBDCs for tokenised cross-border international payments within Africa.
• The shift toward CBDCs could alter the global financial landscape by reducing the reliance on the US dollar-based SWIFT messaging system, which currently allows the US to impose financial sanctions on countries like Sudan and Zimbabwe.

APA

JOHNSTON, L. A. (2024). China’s Central Bank Digital Currency: A New Force in African Finance? South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2024/03/SAIIA_-OP_353_ChinaCBDC.pdf

Chicago

JOHNSTON, LAUREN A. China’s Central Bank Digital Currency: A New Force in African Finance? South African Institute of International Affairs, 2024. https://saiia.org.za/wp-content/uploads/2024/03/SAIIA_-OP_353_ChinaCBDC.pdf.

Wikipedia

{{cite report |last1=JOHNSTON |first1=LAUREN A |title=China’s Central Bank Digital Currency: A New Force in African Finance? |publisher=South African Institute of International Affairs |date=February 2024 |url=https://saiia.org.za/wp-content/uploads/2024/03/SAIIA_-OP_353_ChinaCBDC.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{johnston2024chinas, author = {JOHNSTON, LAUREN A}, title = {{China’s Central Bank Digital Currency: A New Force in African Finance?}}, institution = {South African Institute of International Affairs}, year = {2024}, month = feb, url = {https://saiia.org.za/wp-content/uploads/2024/03/SAIIA_-OP_353_ChinaCBDC.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }