Located between South Africa and Mozambique, the small landlocked country of 1.2 million has published a design document on its potential CBDC called digital lilangeni. This digital currency will be the digital version of the kingdom’s local currency, lilangeni, and can be used for retail transactions.

Digital lilangeni will be a tokenized retail CBDC that runs on a distributed database rather than a distributed ledger. This technical difference indicates that digital lilangeni aims to provide a more reliable and flexible infrastructure than traditional distributed ledger technologies such as blockchain.

CBDC consultant John Kiff pointed out this design document recently published by the Central Bank of Eswatini. According to Kiff’s reviews, it plans to offer digital wallets, online wallets and physical wallets that can work without internet access. It is stated that physical wallets will be in the form of smart cards and can be used in places where there is no internet.

One of the most important features of this CBDC is that it will be distributed to its users through financial institutions. Digital lilangeni offers an intermediary system where financial institutions carry out their transactions through the infrastructure operated by the central bank.

Users will be able to obtain this digital currency through financial institutions, just like they use traditional money. Additionally, a “semi-anonymous” structure is envisaged, preserving privacy but also complying with Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements.

Digital lilangeni will support programmable payments. Thanks to this programmability, automatic payments can be made at the wallet level or special restrictions can be applied on spending. For example, transactions such as imposing limits on children’s expenses or making certain payments on time will be facilitated.

This feature is considered an important opportunity to strengthen financial regulations in developing economies. The use of cash, which is still the most common payment method in Eswatini, will be tried to be reduced with this type of digital transformation.

Although the use of digital financial services such as mobile money and debit cards has increased in the country, cash payments remain dominant. The Central Bank had decided to phase out the use of checks in 2022.

Interoperability is also an important issue for the successful implementation of CBDC. Digital lilangeni must be compatible with the existing electronic money infrastructure and be able to perform transactions according to international standards.

Eswatini’s national currency, the lilangeni, is pegged to the South African rand. Therefore, digital lilangeni was also designed to integrate with this currency.

The CBDC design was developed by Giesecke+Devrient using Filia CBDC technology and underwent various tests. The design was tested both in a sandbox environment and implemented in a live pilot project.

However, staff training in these processes has been a source of delay. This education will need to be addressed on a large scale before CBDC can be implemented more widely.

The Eswatini CBDC proposal is similar to Rwanda’s digital currency plans in many ways. Both countries’ digital currencies will be token-based and run on a distributed database, which is seen as more reliable than blockchain.

Additionally, both CBDCs will have programmability. Although this feature is less preferred in developed countries, it can offer many advantages in developing economies.

For example, in Kazakhstan, programmable CBDC is seen as an anti-corruption tool, and such functions could facilitate economic regulation in countries such as Eswatini.

Digital lilangeni aims to make a significant contribution to the financial infrastructure of the Kingdom of Eswatini. This CBDC aims to reduce the use of cash, facilitate local and international trade, and increase financial inclusion.