The Bank of Ghana’s agenda to promote innovative and affordable digital financial services as a means of expanding financial inclusion and encouraging the use of digital payment is commonplace. It is in pursuit of this goal that the Bank of Ghana in partnership with Giesecke+Devrient announced the concept of the eCedi – a digital version of the Cedi banknotes and coins.
From the point of the Central Bank Digital Currency (CBDC) taxonomy, the digital Cedi (or the eCedi) is a retail token-based CBDC. The concept is similar to cash payment transactions, where payment is done by transferring banknotes and/ or coins from person A to person B.
According to the BoG, the eCedi would be designed to have the following characteristics:
- be accessible both to the general public and businesses;
- cover low-value payments;
- utilize existing payment infrastructure;
- mitigate potential risks for the banking system disintermediation
Key stakeholders in the Ghanaian financial sector amid the designing of the eCedi include consumers, banks, FinTech, merchants, government, and the central bank. According to the design paper, the Bank of Ghana seeks to use the eCedi in attaining its strategic goals, namely;
- Increase digitization of the Ghanaian economy;
- Foster financial inclusion and consumer adoption of digital payments;
- Anticipate the future role of BoG as an active regulator and facilitator of a digital economy;
- Foster the possibility of a more secure, efficient, and resilient payment system;
- Address the risk of unregulated privately issued digital “currencies” or virtual assets
The eCedi which will completely be under the control of BoG, and made available via banks and payments providers will be stored on two types of wallets namely; Hosted Wallets (managed by financial institutions) and Hardware Wallets (secure portable storage devices held by individuals). Hosted wallets require access to the internet while hardware wallets work in offline mode.
In light of consumer or stakeholder usage, the BoG shall define policies that will cover wallets, transaction limits, monitoring, regulatory compliance, and sanctions for breaches. The BoG also believes that, the success of the eCedi hinges on the ability to functionally design the eCedi and its platform to ensure appropriate user experience and inclusiveness. Thus, fostering broader user acceptance.
In BoG’s quest to ensure an excellent user experience, the eCedi usage will be as easy and intuitive as possible with easy and near-instant transaction confirmation and traceability. Thus, consumers should be able to make payments in fewer and simple steps familiar to them and with no need for sophisticated digital literacy.
Furthermore, the BoG seeks to ensure country accessibility of the eCedi, hence making it effectively functional in both online and offline environments. The retail CBDC could be used by individuals for Peer-2-Peer transfers, and Peer-2-Business, Business-2-Peer, Business-2-Business, Peer-2-Government, and Government-2-Peer payments besides cash and existing payment media and instruments (i.e., e-money, payment cards, etc.).
Since the eCedi is designed by the principles of governance, accessibility, interoperability, requisite infrastructure, and security, the eCedi will be integrated into the existing interbank payment systems and mobile money interoperability platform operated by the Ghana Interbank Payment and Settlement Systems Limited (GhIPSS).
As a currency, trust is critical to the adoption and usage of the eCedi. Hence the BoG ensures that the eCedi meets very high security requirements by addressing the issue of cyber risk.
More importantly, domestic CBDCs are designed with the prospects of adaptation for interoperability with CBDCs of other jurisdictions. Efforts to accelerate the integration of the economies of African economies, particularly under the African Continental Free Trade Area (AfCFTA) make this a key consideration in the eCedi design.
This release comes on the back of the Central Bank of Ghana’s announcement of its partnership with Giesecke+Devrient to Pilot First General Purpose Central Bank Digital Currency in Africa in August 2021.
