As a seasoned researcher with a keen interest in emerging technologies and their impact on developing economies, this news about Zanzibar’s National Blockchain Sandbox piques my curiosity. Having spent a significant portion of my career studying financial inclusion and digital innovation in Africa, I am thrilled to see Tanzania, particularly Zanzibar, taking bold steps towards embracing blockchain technology.
In simpler terms, the government of Zanzibar, part of the larger nation of Tanzania, has established a “National Blockchain Sandbox” to motivate technology startups in this area. This sandbox allows these companies to test and develop blockchain technologies without fear of immediate regulatory implications.
The sandbox will allow developers to test innovative technologies on the National Blockchain Network. Projects that feature financial inclusion, identity verification and certification issuance will have priority, Kenyan Wall Street reported.
Supporting tech innovation
Entry into the playground comes accompanied by possible advantages such as training subsidized by the government and nurturing programs offered through incubators. The Director General of the e-Government Authority of Zanzibar, Said Seif Said, elaborated on this.
“Innovators will have the opportunities to work on pilot projects, collaborate with experts, and receive mentorship from industry leaders, which is very critical.”
The sandbox was designed by Dubai-based LedgerFi IT and will operate on the EVM-compatible layer-1 XDC network.
A gradual spread of blockchain technology
In July, the Bank of Tanzania (BOT) established a legal structure for fintech experimental zones. This was following a year of planning and preparation. The guidelines set out who can apply, how to apply, and specify a nine-month trial period. Approximately 75 fintech startups currently operate in Tanzania.
In the year 2023, approximately 24.4 million Tanzanian adults, which equates to 72%, were active users of mobile money platforms, while only around 7.5 million adults, or 22%, utilized commercial bank services. This implies that about 18.7% of the overall population was categorized as ‘financially excluded’.
In 2019, the BOT (Bank of Tanzania) advised against dealing with or exchanging cryptocurrencies, emphasizing that the Tanzanian shilling is the only officially recognized currency within the country. Despite the absence of regulations governing crypto usage, a survey conducted in 2023 revealed that 1.7% of Tanzanian adults have invested in cryptocurrencies, while 9.7% are familiar with them.
However, in June, Tanzanian think tank Governance & Economic Policy Centre noted in a report:
“Kenya and Tanzania are so far reported as having the largest number of crypto entrepreneurs and transaction volumes in East Africa. These statistics are however not official.”
In 2021, there were reports suggesting that Zanzibar might have chosen to use cryptocurrency separately from the central government, following Tanzania’s President Samia Suluhu Hassan’s endorsement of this digital currency.
As an analyst, I found myself pondering the idea of introducing a Central Bank Digital Currency (CBDC) back in 2023. However, I approached this prospect with a sense of caution following my comprehensive study. In recognition of the need for further exploration, the central bank has initiated a second round of research, commencing in June.
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2024-10-23 21:42