Digital Currency and Commercial Banks in Tanzania: Evaluating the Preparedness, Potential Risks and Emerging Opportunities

Abstract

This study assessed the preparedness of Tanzanian commercial banks to adopt digital currencies and explored the effects of perceived preparedness, perceived opportunities, and perceived risks. A quantitative design was employed, and data were collected from 250 bank employees across various commercial banks using structured questionnaires. Multiple regression analysis was utilized to analyze the data. The analysis revealed that preparedness for digital currency adoption was positively and significantly predicted by perceived preparedness (B = 0.251, p < 0.001) and perceived opportunities (B = 0.200, p = 0.003), while perceived risks (B = -0.069, p = 0.433) had a negative but insignificant influence. The study concludes that although Tanzanian commercial banks demonstrate moderate technical preparedness and an awareness of potential opportunities, issues such as security threats, regulatory uncertainty, and currency volatility persist. The policy implications suggest that, to accelerate the adoption of digital currencies, policymakers and regulators must implement enhanced cybersecurity measures, promulgate clear and constructive regulatory guidelines, and facilitate strategic staff training programs. Furthermore, banks should be incentivized to develop internal digital currency strategies aligned with central bank operations to foster a coordinated transition towards an inclusive, sound, and innovative financial sector.