Ethiopia Legalizes Foreign Banks, Sets Framework for Central Bank Digital Currency

The Council of Ministers today approved the draft NBE Proclamation and Banking Business Proclamation. The two bills that still need to be ratified by the House of Representatives are the draft banking business proclamation, which allows granting foreign banks with licenses to operate in Ethiopia and National Bank of Ethiopia (NBE) proclamation.

Ethiopia: Council Approves Laws to Open Banking Sector, Facilitate CBDC

The Council of Ministers in Ethiopia has approved two draft laws that will further liberalize and modernize the country’s financial sector.

According to a post by the National Bank of Ethiopia, the council approved the draft NBE Proclamation and Banking Business Proclamation on June 14.

The two bills, which still need to be ratified by the House of Representatives, include the draft banking business proclamation, which allows granting foreign banks with licenses to operate in Ethiopia, and the National Bank of Ethiopia (NBE) proclamation.

Among other things, the NBE proclamation establishes a legal framework for the introduction of a central bank digital currency as necessary.

According to an earlier report, the National Bank of Ethiopia (NBE) is set to initiate a study on the use of a Central Bank Digital Currency (CBDC) in June 2024.

The Ethiopian central bank classifies digital currencies, including Bitcoin and other cryptocurrencies, as illegal, but the government has recently licensed dozens of data mining firms, many from China, looking to Ethiopia as a base of operations for its low electricity tariffs.

The banking business proclamation itself allows granting foreign banks with licenses to operate in Ethiopia. Ethiopia’s banking industry is dominated by the state-owned Commercial Bank of Ethiopia, with a total of 32 locally-owned banks in the sector.

The decision comes nearly two years after the Prime Minister Abiy Ahmed’s cabinet adopted a policy to open the banking sector to foreign investors, as reported by BitKE.

The Central Bank has been making legislative changes to implement a new policy and plans to issue up to five banking licenses to foreign investors over the next five years, local reports indicate. This includes amending the Banking Business law which was discussed by the ministerial council on June 14 2024.

According to a statement from the Prime Minister’s Office, the draft law was prepared in response to recent economic and technological developments in the global financial industry, as well as the policy change. It establishes a legal framework and control mechanisms for issuing banking licenses to foreign investors and managing the process.

Under this law, foreign investors can enter the banking business by opening foreign bank subsidiaries, branches, or investing in shares of existing domestic banks. Representatives of foreign banks will be regulated by the National Bank.

The council unanimously voted to endorse the draft laws and forward them to parliament for ratification.

News source：https://www.kdj.com/cryptocurrencies-news/articles/ethiopia-legalizes-foreign-banks-sets-framework-central-bank-digital-currency.html

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