Tunisia to Pioneer in Blockchain Technology

Tunisia is reportedly aiming to be a pioneer in blockchain technology, as the central bank of the country explores blockchain technology and its use for a national digital dinar.

Tunisia’s central bank, the Banque Centrale Tunisienne (BCT) has set up a working group for the project, with its newly appointed governor Marouane El Abassi and Walid Driss, the Tunis-based founder and CEO of DigitUS Tech reportedly working together. The group will study blockchain, digital payments, and cryptocurrencies, among others.

“A blockchain-based, central bank digital currency could combat money-laundering, decrease the country’s gray economy, and at the same time, empower women and weaker segments of the Tunisian population,” Abassi and Driss said.

Walid Driss has also been reported to help La Poste Tunisienne, the postal service of Tunisia, to launch DigiCash, which is a blockchain-based digital payment system.

Tunisia has also been noted to follow the footsteps of countries leading in the adoption of blockchain technology to become cashless economies. The central bank of Sweden, Sveriges Riksbank, is also working on a blockchain-based “e-krona” to serve as an alternative form of central bank-issued money, further reducing the use of cash in the country. According to studies, almost 90% of financial transactions in Sweden are reportedly cashless. Its neighboring country, Finland, is set to follow Sweden’s model and predicts it will become completely cashless by 2029.

According to a research paper published by World Economic Forum, central banks are now beginning to explore the potential of blockchain in areas that include digital know-your-customer (KYC) and anti-money-laundering (AML) processes, especially in the European region, as well as trade finance, bond auction, issuance and other lifecycle processes, information exchange and data sharing, interbank payments and settlements, among other use cases.

Over the next years, with enough time to improve this technology, more and more central banks are expected to use this technology to adapt to changing market conditions and security demands.

 

There are a lot of ways central banks are experimenting with blockchain. Among these are:

Retail Central Bank Digital Currency (CBDC), which is settled in a decentralized manner making CBDC, in this form, easier to use. It also replaces cash (or even complements it) and it can also serve as a substitute to traditional bank deposits.

Wholesale CBDC, also operated in a decentralized, peer-to-peer manner but this is only available to commercial banks, unlike its retail version and is also exclusively used for clearing houses in wholesale interbank markets.

Interbank securities settlement, which is the focused-application of digital currency based in blockchain technology. It includes CBDC and it enables quick clearance for interbank transactions and settlement of securities for cash, where the goal is to develop a “delivery versus payment” system for banks, allowing two parties to exchange assets simultaneously.

Payment system resiliency and contingency, where blockchain provides a certain level of security from technical and network failure, natural disasters, cybercrime, and other forms of threats.

Bond issuance and lifecycle management where blockchain technology is used in transactions involving bond auction, bond issuance, and other lifecycle processes. These are all made often to reduce costs and increase efficiency. The use of DLT in these types of transactions can be applied to those bonds issued and managed by sovereign states, as well as those bonds used by international organizations and government agencies; and

Know Your Customer (KYC) and Anti Money Laundering (AML), which are requirements often used in the Regulatory Technology (RegTech) industry. Digital KYC and AML often use blockchain technology to track and record customer payments and use this customer information to streamline processes to make them quicker. This could potentially be used to interact with CBDC to track financial activities.

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