Tag: pilot test

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.

India’s Central Bank to Begin Testing Its CBDC in December

India has announced that it is ready to begin testing its electronic rupee towards the end of 2021.  The governor of India’s central bank, Shaktikanta Das, disclosed that in an interview with CNBC media outlets.

Das told CNBC that the Reserve Bank of India (RBI) is at least well placed to start pilot programs for its central bank digital currencies (CBDC) by December.

“I think by the end of the year, we should be able to — we would be in a position, perhaps — to start our first trials,” Das told CNBC.

The governor stated that the central bank of India is studying several aspects of its CBDC including its security, impact on India’s financial sector, as well as how it would affect monetary policy and currency in circulation.

“We are being extremely careful about it because it’s completely a new product, not just for RBI, but globally,” Das said.

The governor recognized that the security of the national digital currency is a top priority in studying multiple aspects of operating such an asset as well as assess technological issues. “The possibility of cloning … should be avoided,” Das said.

Das further stated that the central bank is studying the option of using a central ledger for the CBDC or the so-called distributed ledger technology (DLT).

A central ledger refers to the database operated and owned by a single entity, and in this case, is the central bank. On the other hand, distributed ledger technology (DLT) is a digital database that allows multiple participants to access, share, and record transactions simultaneously. The majority of cryptocurrencies run on the distributed ledger technology (DLT).

Last month, the deputy governor of the Reserve Bank of India, Rabi Shanka, said that the central bank was working toward a phased introduction for its CBDC and was assessing various issues including the underlying technology and issuance method. The deputy governor further revealed that trial programs for both wholesale and retail components of the digital currency could be possible in the near future.  

Rush to Replace Cash with Digital Currency

In January, The Bank of International Settlements conducted a survey, which shows that 86% of central banks around the globe are actively researching the potential of CBCDs, 60% were experimenting with the technology while 14% were deploying pilot projects.  

To date, only five nations have fully launched a CBDC, with the Bahamian Sand Dollar as the first digital currency to become widely available.

China takes the lead in the CBDC landscape and has already begun trials of its digital yuan central bank digital currency in several cities while the Bank of England and the US Federal Reserve are looking into a digital currency for a possible launch in the future.

India’s central bank has been working on the idea of a national digital currency for years. In recent years, private cryptocurrencies such as Bitcoin have gained widespread popularity in India, with data showing that the nation has about 15 million investors holding more than 100 billion rupees (€1.14 billion) in cryptocurrencies.

The Reserve Bank of India has repeatedly raised concerns over the rise and use of crypto assets which it sought to ban in April 2018. However, the central bank withdrew the ban in March 2020 when the country’s supreme court stated that the move was unconstitutional.

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