Tag: ghana

Ghana Confirms Its Interest in Piloting Central Bank Digital Currency

Ghana has confirmed that it is on the hunt for a Central Bank Digital Currency (CBDC).  The Bank of Ghana’s deputy governor, Dr. Maxwell Opoku-Afari, recently revealed that the country’s central bank remains committed to piloting a national digital currency.

He made such remarks during a virtual stakeholder workshop on payment systems and services as reported by GhanaWeb.

The rollup exercise still in consideration

Dr. Opoku-Afari said that the nation’s shift to digital payments has influenced a greater need for a CBDC. He stated that Ghana’s economy has gone through a significant transformation in the previous decade. This hence has contributed to an increase in the use of digital payment technologies.  

The deputy governor confirmed that the central bank of Ghana is working on creating a fintech sandbox (ecosystem) to encourage innovations within the digital payments industry.  He revealed that the regulator would use the sandbox to test new concepts in digital payments, with a CBDC being recognized as the top of the list.

In November 2019, the central bank created an innovation and fintech office to spearhead the development in the local industry. The office has adapted its organizational structure to respond to major changes within the payment sector.

Despite these approaches to promote electronic cash transactions, the deputy governor stressed that the bank’s specific pilot plans for a CBDC remain on solid ground.  

Dr. Opoku-Afari stated that the CBDC would complement the rapid growth of the nation’s mobile money industry. He disclosed that the national digital currency would be vital in the government’s financial inclusion efforts.

Currently, Ghana suffers from inequality in its banking industry, having more unbanked women and rural dwellers. The country has been one of the highest adopters of cryptocurrencies in Africa. In 2019, Ghana registered the fourth-highest Google searches for Bitcoin, behind Nigeria that had the highest searches.  

Despite the crypto adoption and interest in CBDC, Ghana is yet to develop regulations for the digital currency industry. The country’s Securities and Exchange Commission (SEC) proposed licensing of cryptocurrencies as a legal tender in January 2019. This came after investors lost their funds to a crypto startup.

However, not much has come from this proposal. Crypto traders still operate in a gray area as the government has not introduced regulations.

The issuance of China’s CBDC on the horizon

China is set to become the first country to issue its CBDC. The nation has been working on its CBDC for over five years and now is very close to issuing it to the general public. The central bank of China is expected to launch its national digital currency within this year.

The national digital currency is being tested in four major cities in the country. Many analysts have identified that China’s digital yuan could threaten the US dollar’s global dominance. Several other central banks across the world are also showing interest and therefore are looking into and researching national digital currencies.

Ghana Examining Offline Use of Its “E-Cedi” CBDC

Ghana is working on developing offline usability for its upcoming Central Bank Digital Currency (CBDC) to ensure that all segments of society use digital currency.

Speaking at the Ghana Economic Forum on Monday, October 18, Kwame Oppong, the head of fintech and innovation at the Bank of Ghana (BoG), announced that the effort to bring financial services to people without access to bank accounts would not be hindered by the availability of power and connectivity.

Oppong emphasized that the country’s digital currency “e-cedi” would support offline functionalities that allow Ghana’s citizens who lack reliable access to electricity and internet connectivity to embrace the country’s CBDC. 

“What we hope to be able to do – and we’re one of the people pioneering this – is that the e-cedi would also be capable of being used in an offline environment through some smart cards,” 

Oppong explained that the country’s digital currency would work offline through the use of smart cards.

Like modern bank cards, smart cards are plastic credit-card-size with a chip that allows users to transact by using a pre-loaded balance. 

84% of Ghana’s citizens had stable access to electricity, while 53% had internet connectivity, according to data published by the World Bank in 2019.

Since 2019, the Bank of Ghana has planned to issue a CBDC and stated that it was in advanced stages earlier this year.

In August, the Bank of Ghana enlisted German outfit Giesecke+Devrient (G+D) to provide the technology and technical expertise for the e-Cedi project, which will be tested with payment service providers, banks, merchants, and consumers.

Retail CBDC Development

CBDCs are being designed to be available via smartphones.

In October 2020, the Bahamas overtook economic giants to launch the world’s first official CBDC. In line with serving the underbanked, the Central Bank of Bahamas developed its digital currency, the digital Sand Dollar, to be transferable via smartphones, making it easy for use among the residents. The CBDC is even usable while offline, making it a good payment choice for people without an internet connection. 

The offline availability was critical during the development of the digital currency by The Central Bank of The Bahamas (CBOB), considering that the country is prone to natural disasters. Sand Dollar’s mobile phone functionality means the financial recovery aspects can progress more safely and quickly when natural disasters like Hurricanes hit the island and cause internet disconnection.

China is also reported to be trying a similar smart card-based solution for its digital currency. Residents would be able to transfer their digital yuan from bank accounts directly to an offline card.

While more than 80% of countries across the globe are engaged in CBDC-related research, China, the Bahamas, Sweden, the Marshall Island, and the Eastern Caribbean Currency Union are currently the pioneers in the CBDC space.

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