In Brief

• CBDC implementation in Rwanda enters a proof-of-concept phase, focusing on offline payments, USSD access, and integration with existing systems.

• Selected banks, merchants, and institutions will test security, legal, and user-experience features over a five-month period.

• Public ideathons and consultations ensure the CBDC design remains inclusive, complementing, but not replacing, mobile money services.

Rwanda’s exploration of CBDC implementation has shifted into high gear with the National Bank of Rwanda(BNR) launching a retail CBDC ideathon. The BNR is setting up a proof-of-concept(PoC) stage, taking a hands-on testing phase and calling upon select industry leads to shape its design and future use cases.

Rwanda Advances CBDC Proof-of-Concept: Testing Offline Payments & USSD Access

The notion of a Rwandan CBDC has been built up since March 2022, with the BNR launching a feasibility study and extensive public consultation. After three years, the central bank is ready for the next phase: validating its technical and use case requirements. In a nutshell, it’s a shift from theory to practical tests.

The bank announced that the PoC shift will involve a selected group of participants, including commercial banks, merchants, and institutions. Their role is vital: testing core functionalities in controlled environments over five months, with results expected by October 2025.

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Core Features Under the Microscope

CBDC implementations are no easy feat, given Africa’s limited success stories. The proof-of-concept zeroes in on various foundational design elements identified during the initial research phase. They include:

• Offline CBDC Payments

For Africa, digital assets are preferred not for value but for utility. The PoC will test the mechanisms for conducting CBDC transactions even during network outages or power disruptions. It tugs on the need for better financial access in Rwanda’s rural communities.

• USSD Digital Currency Access

It’s only recently did blockchain crossed the USSD barrier with Machankura, and smartphone penetration isn’t universal. The BNR aims to test USSD digital currency functionality, accommodating a good portion of users without internet access, with the potential Rwandan CBDC. The focus aims at using simple menu-driven codes, similar to existing mobile money services, but backed by blockchain

• Robust Security and Legal Frameworks

Security and regulations are still the main concerns even within blockchain. It’s non-negotiable, and the PoC intends to stress-test security protocol designs to protect the network. Concurrently, legal implications also heavily affect adoption, and current laws have limited applicability.

• User Experience & System Integration

Pursuing proper CBDC implementations focuses mainly on national adoption; hence, implementing a system that integrates seamlessly with Rwanda’s existing national payment infrastructure is vital for adoption.

As per the announcement:

“The PoC aims to test foundational design features as suggested by the research phase, legal, cybersecurity and payment system implications. The Proof of concept will inform the decisions for further live pilots or a differentiated stance.

The Strategic Imperative: Why Rwanda is Pursuing a CBDC

Developing and implementing CBDCs is a bold move given recent failings from peer countries, i.e., eNaira. However, the BNR seeks a different approach, designing a Rwandan CBDC as an alternative means, not a national shift. It envisions a complementary service to existing payment options, not a replacement. This adds a layer of accessibility, inclusive and resilient digital choice for Rwandans.

The bank focuses on the benefits of CBDCs as a supplement to the nation’s overall digital transformation. For instant, the offline CBDC payments ensure financial services remain accessible while offering a cheaper alternative to mobile payments. This highlights a need for change from Rwanda’s mobile money market duopoly, creating an opportunity for other fintech services to thrive.

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The era of physical money is steadily ending as costs associated with printing, transporting, storing and securing continue to rise. A digital alternative cuts costs for the nation by half, leaving more room to focus on security and expansion.

Public Engagement and Cautious Progression

The nation has grounded its CBDC implementation via its rigorous research and public engagements. In 2024, the BNR invited public feedback via a questionnaire covering economic, functional, legal and financial aspects regarding the digital asset.

Its latest retail CBDC ideathon solicits input from fintechs, startups and innovators and the general public to help design a framework preventing roll-backs. The CBDC pilot programs are still some ways away, with the announcement only focusing on technical testing. As per the time of writing, the results of the testing will determine whether the BNR will proceed to broader live pilots, refine the design or potentially pause the initiative altogether.

This prevents likely scenarios previously witnessed in African-based CBDCs, with a majority opting for stablecoins. The public outlook on CBDCs is still marred, with many users viewing it as a means of control rather than financial inclusion.

Despite this, the steady progress shows how blockchain has become a viable option for many regions throughout Africa.