The Bank of Ghana (BoG) has disclosed that Ghana’s version of the Central Bank Digital Currency (CBDC), eCedi, will be under the Bank’s full control as the only entity to create and destroy digital cash.
The Bank of Ghana however, stated that the ecosystem of the eCedi will include key players such as banks and payment service providers, to provide access to end consumers.
“Foremost, the eCedi has to be under full control of BoG, being the only entity to create and destroy digital cash. Simultaneously, the ecosystem of eCedi should include the participation of banks, SDIs and PSPs to facilitate interaction between the central bank and end consumers. This will be an approach to encourage adoption through user-focused value-added services, accessibility and innovation on the back of the eCedi”.Bank of Ghana
This is contained in the new Design Paper on the digital Cedi issued by the Bank of Ghana. The paper gives an overview of the motivations of issuing the eCedi, the potential benefits for stakeholders, the design principles of the eCedi, including the governance, accessibility, interoperability, requisite infrastructure and security.
Motivations of issuing the eCedi
The Bank of Ghana indicated that the motives for introducing a digital currency are numerous and vary from country to country. However, in Ghana, the motives include a combination of factors such as: facilitation of financial inclusion, pursuit of a cash-lite economy, enhancing operational efficiency and cost-effectiveness in payments, and provision of a safe, secure and trustworthy alternative to privately issued digital currencies.
Dr. Ernest Addison, Governor of the Bank of Ghana, said in the foreword of the Design Paper that the Bank of Ghana has proceeded on the understanding that a CBDC may be designed with a variety of possible architectures and design features.
“In this regard, Ghana’s CBDC project is tailored to needs as stated in its policy objectives. To better identify such needs, BoG conducted comprehensive research on the issue, the results of which has informed the effective design solution for the eCedi. It is envisaged that the digital currency will dovetail with the existing payment landscape of Ghana. Bank of Ghana therefore, would extensively engage stakeholders to the extent possible for their active participation and successful implementation”.Dr. Ernest Addison
The Governor expressed his profound appreciation for the feedback received from the individuals, banks, FinTech companies, and academics through answers and comments to questionnaires, interviews and interactions during the design phase.
Success of eCedi depends on public acceptance
The Bank of Ghana indicated that the success of the eCedi is crucially dependent on public acceptance which means, it must provide real benefits for the users. As a result, it has to be accessible to everybody, usable for payments in all sorts of situations and everywhere. This means a person can pay with the eCedi in a retail shop, but also use it for online shopping or sending money to another individual.
As such, “We encourage all Ghanaians to jointly support the eCedi pilot project towards a future stable, digitally advanced, and innovative financial system for Ghana”, Dr. Addison said.
BoG disclosed that it has designed two types of wallets for the eCedi namely: hosted wallets managed by financial institutions and hardware wallets, which are secure portable storage devices held by individuals. Hosted wallets require access to the internet while hardware wallets work in an offline mode.
“The eCedi has to be accessible to everyone and any part of the country. Absence of mobile data networks in the rural areas of Ghana should not serve as a barrier to the use of the eCedi. In other words, the eCedi should work effectively in both online and offline environments”.Dr. Ernest Addison
BoG further underscored that both the sender and receiver will receive a confirmation of a successful transaction and similar to cash, an eCedi transaction will be free of charge to consumers.
By this approach, BoG stated that “the eCedi would be a strong contender of cash, promote competition in the payment market and facilitate the provision of innovative value-added services to individuals and businesses by banks and payment service providers at affordable fees and charges”.
Handling large volumes of payments
Meanwhile, BoG assured that the technology powering eCedi payments will be able to handle increased volumes if the demand for eCedi payments increases significantly.
“The eCedi will be functionally compatible with the existing payment instruments and will support instant payments. In effect, the process of a payer initiating a payment to a payee should be completed as quickly as possible, with certainty of completion. Transactions for offline payments are settled instantly without accessing a backend system”.Bank of Ghana
As a currency, trust is critical to the adoption and usage of the eCedi but BoG gave the assurance that the eCedi will meet “very high security requirements”. The Bank is however, not oblivious of the fact that switching to the eCedi from cash, particularly the onboarding process, would be quite facile.
The Regulator assured the public that it will define policies for participants in the ecosystem which will cover wallets, transaction limits, monitoring and regulatory compliance, and sanctions for breaches.