Five years ago, Ghana was among the frontrunners in Africa’s central bank digital currency (CBDC) race, with its digital currency research more advanced than most nations. However, it has since fallen behind its neighbor Nigeria, whose eNaira launched over three years ago. The Bank of Ghana (BoG) now intends to introduce its CBDC this year.
Meanwhile, the head of the Bank for International Settlements (BIS) has continued his attack on digital assets, this time stating that stablecoins will be phased out by CBDCs and improved digital payments.
Ghana ready to launch CBDC
Ghana’s e-Cedi has been in development for over five years. The top bank has been working with Germany’s tech firm Giesecke+Devrient (G+D), testing various payment scenarios on the firm’s CBDC platform Filia, which other countries like Singapore, Thailand and Brazil have also used.
Kwame Oppong, who heads fintech and innovation at the BoG, now says the bank is ready to launch the eCedi this year. However, whether lawmakers pass a new law legalizing the digital currency depends.
Oppong’s views were included in a recent CBDC report by G+D, which found that 72% of central banks expect to issue a digital currency, with 48% planning to issue one within the next five years.
The report revealed that Ghana has prioritized offline functionality with the eCedi to better serve marginalized residents living in remote areas.
“It was an important feature for us to deliver because, at present, there is no commercial solution that allows for digital money to function in an offline environment,” Oppong revealed.
The central banker said that offline payments are no longer a challenge, noting that this technology “has been around since the 1990s, but the challenge was to ensure that the requirement of frequent reconnection and re-syncing was not obstructive.”
Offline access will be critical to the success of the eCedi. While mobile connectivity in Ghana is over 100%, internet connectivity stands at around 70%. Ghanaians without internet access are mainly in the rural areas and account for the highest unbanked figures, making them the intended target for the CBDC.
“We wanted to create an instrument that allows people to live off-grid and use it as they would use cash,” Oppong stated.
Globally, the debate about whether retail CBDCs are needed rages on. In some countries, central banks have surmised that existing instant payment systems (IPS) are sufficient for their citizens and abandoned CBDC projects.
However, according to Oppong, giving a CBDC offline functionality makes it better than these systems, which are almost exclusively available via the Internet.
“Yes, IPS offer advantages, but when you consider how payments are developing, we believe that those who move to an IPS now will end up moving to a CBDC later in any case, so we might as well go straight there,” he stated.
While some central banks have explored DLT for their CBDCs, Ghana will steer clear of decentralized technology, at least in the initial phase, Oppong revealed. BoG opted for a centralized model, but the eCedi will be flexible to allow interoperability with DLT systems.
Can CBDCs make stablecoins obsolete?
Elsewhere, the head of the BIS has questioned the need for stablecoins in light of CBDCs and improved payment rails.
Following one of the panels at the Chapultepec Conference in Mexico City, BIS general manager Agustín Carstens stated that most of the demand for digital assets is due to the slow evolution of traditional payment systems.
“If we had, for example, a wholesale central bank money or reserve currency, technologically advanced, do you think that could make up for the demand for stablecoins?” he asked panelist Christine Parlour, a professor at UC Berkeley’s Haas School of Business.
Carstens added that since stablecoins are backed by cash and central bank treasuries, the financial industry should “concentrate more on making the ‘real thing’ to be able to be represented technologically in such a way that the space that stablecoins or crypto is filling would be filled in a more solid way.”
It’s not the first time the BIS has blasted digital currency. In a 2023 report, it tore into the perceived decentralization ethos under which digital currency claims to operate.
“The sector operates under the banner of decentralization, but in practice new centralized intermediaries have played a key role in channelling funds into the crypto universe and intermediating within it,” the report stated.
Watch: CBDCs are more than just digital money
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