Ghana Prepares to Launch CBDC While BIS Critiques Stablecoins

Ghana is ready to launch its e-Cedi CBDC after five years of development, focusing on offline functionality to assist unbanked individuals. Meanwhile, the BIS argues that CBDCs could phase out stablecoins as they address payment system inefficiencies and emphasizes a need for solid digital currency solutions as alternatives to stablecoins.

Ghana is preparing to launch its central bank digital currency (CBDC), the e-Cedi, which has been in development for over five years. The Bank of Ghana (BoG) collaborated with the German tech firm Giesecke+Devrient (G+D) to test various payment scenarios using their CBDC platform, which has also been utilized by countries such as Singapore, Thailand, and Brazil. Despite falling behind Nigeria’s eNaira, the BoG is poised to introduce the e-Cedi this year, pending legislative approval.

Kwame Oppong, the head of fintech and innovation at the BoG, emphasized the importance of offline functionality for the e-Cedi. This feature is designed to accommodate Ghanaians living in remote areas with limited internet access, allowing them to use digital currency similarly to cash. He stated, “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.”.

The central bank aims to make offline payments feasible as a crucial element for the success of the e-Cedi, particularly since mobile connectivity exceeds 100% in Ghana, while internet connectivity stands at approximately 70%. The intended target for the CBDC includes unbanked populations predominantly situated in rural areas. “We wanted to create an instrument that allows people to live off-grid and use it as they would use cash,” stated Mr. Oppong.

Unlike some central banks exploring distributed ledger technology (DLT) for their digital currencies, Ghana plans to adopt a centralized system for the initial launch of the e-Cedi. Nevertheless, this approach will permit future integration with DLT, ensuring interoperability as technology evolves. Mr. Oppong remarked, “we might as well go straight there” in transitioning towards CBDCs instead of relying solely on Intermediate Payment Systems (IPS).

In related news, Agustín Carstens, general manager of the Bank for International Settlements (BIS), has expressed skepticism regarding the necessity for stablecoins in light of the emergence of CBDCs and advancements in payment systems. During a conference in Mexico City, he argued that the demand for digital assets currently arises from deficiencies within traditional payment frameworks. He asked panelist Christine Parlour whether a technologically advanced central bank reserve currency could sufficiently address the demand for stablecoins.

Carstens highlighted that stablecoins depend on cash and central bank treasuries, advocating for the financial sector to focus on enhancing real currency systems to eliminate the need for these digital assets. His concerns echo previous criticisms from the BIS regarding the perceived decentralization of digital currencies, noting that centralized intermediaries play a significant role within the crypto space. According to a 2023 BIS report, “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.”

Ghana is set to launch the e-Cedi, its central bank digital currency, focusing on offline functionality to serve unbanked populations in rural areas. While it hopes to integrate with decentralized technologies in the future, it is adopting a centralized approach initially. Concurrently, the BIS warns that CBDCs may replace stablecoins, urging the financial sector to enhance traditional payment systems to fulfill market demands more effectively.

Original Source: coingeek.com