Ghana is poised to launch its central bank digital currency (CBDC), the e-Cedi, after several years of development. Once a frontrunner in the CBDC landscape in Africa, Ghana fell behind when Nigeria introduced the eNaira over three years ago. The Bank of Ghana (BoG) has announced that it is ready to roll out the e-Cedi this year, pending approval from lawmakers. This move comes as Ghana seeks to reclaim its position in the digital currency arena.
While Nigeria’s eNaira holds the distinction of being Africa’s first CBDC, its performance has not met expectations. Adoption has been sluggish, with less than 0.5% of Nigerians using the eNaira within its first year. By March 2024, it accounted for only 0.36% of the total money in circulation. Several factors have contributed to this lackluster uptake, including inadequate infrastructure, unreliable electricity supply, low public trust in government, and concerns over financial crime.
In light of these challenges, Ghana aims to learn from Nigeria’s experience by incorporating offline functionality into the e-Cedi. This feature will allow users to transact without an Internet connection, which could significantly benefit rural communities where access to the Internet remains limited. Kwame Oppong, head of fintech and innovation at BoG, emphasized the goal of making digital cash as user-friendly as physical cash, particularly for the unbanked population.
However, the necessity of CBDCs is still a topic of debate. Some countries have abandoned their plans, arguing that existing payment systems are sufficient. Nevertheless, Ghana contends that an offline-capable CBDC offers advantages over traditional instant payment methods, as it does not depend on Internet connectivity.
In contrast to other central banks that are exploring blockchain technology for their CBDCs, Ghana plans to keep its approach straightforward initially. The e-Cedi will operate on a centralized system at first, with the potential for future integration with blockchain-based systems if necessary. This strategy allows for a simpler launch, with the option to scale up as needed.
Meanwhile, the Bank for International Settlements (BIS) has expressed skepticism regarding stablecoins. BIS head Agustín Carstens has suggested that as CBDCs become more prevalent and traditional payment systems improve, stablecoins may lose their relevance. The BIS has consistently criticized digital currencies, arguing that the crypto space is more centralized than it purports to be, with significant players exerting control. As CBDCs gain traction, the ongoing competition between traditional finance and cryptocurrency is expected to intensify.
