Bank of Ghana announces digital cedi plans

The Governor of the Bank of Ghana, Dr Ernest Addison  has confirmed that the central bank has been working on a central bank digital currency (CBDC).

The CBDCs project needs to be approached in phases and thus, the governor outlined three stages prior to deciding to launch a digital currency. These are a design phase, an implementation stage, and a pilot phase. The design stage is advanced, and the current focus is on the implementation phase.

After the implementation phase, the bank aims for a pilot phase, however few people would be able to use the electronic Cedi on the mobile applications and other payment applications that are currently running. After the pilot, the bank can decide if this is feasible to roll a CBDC, and what sort of things need to be tweaked to make it work effectively.

Other African states that are exploring CBDC include Morocco, South Africa, Egypt (as of 2018), and possibly Kenya, although the Governor described the bank as ‘on the fringes’ of the exploration by global central banks.

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The plan for a digital currency has elicited mixed reactions from financial analysts and economists in Ghana.

Some hold the view that since the cedi is a non-convertible currency there is little to be gained from having an electronic version since it will not be able to be used for international transactions and so therefore can only duplicate the uses of the fiat national currency held in electronic wallets such as mobile money accounts which is already so popular that it cannot be displaced by a central bank issued electronic cedi.

However proponents of the new initiative believe the BoG is planning the digital currency as a defensive mechanism, hoping it will fend off demand in Ghana for other digital currencies expected to be issued sooner than later including digital United States dollars and Chinese yuan. This argument centres on the need for the BoG to retain control over the volume of currency in issue so as not to lose its powers with regards to the impact of its monetary policy.

Yet another, unfairly cynical school of thought holds that the central bank does not really intend to issue a digital currency but does not want to be seen as being left behind in a trend that is gaining traction among many sovereign jurisdictions..