by JP Buntinx
Various countries are contemplating the idea of issuing their own national digital currencies. Rather than embracing cryptocurrencies such as bitcoin, these digital currencies would still be backed by a central bank. Senegal could become the first country to deploy this strategy, as eCurrency Mind Limited announced they will provide a digital currency to the West African Economic and Monetary Union.
Bank-backed digital currencies are not all that different from physical coins and bills people use to transfer value these days. The bigger different is how this form of e-money makes it easier to send and receive funds across all types of devices. The Banque Regionale de Marches will issue this digital currency, which goes by the name of eCFA, an acronym for electronic Central African Franc.
Adhering to the current e-money regulations imposed by the West African Economic and Monetary Union’s Central Bank is of the utmost importance. These new digital instruments will serve multiple purposes, including the option of transacting across existing payment platforms. Moreover, the value of each unit will be kept at parity to its physical counterpart.
Senegal will be the first region where the eCFA digital currency will be deployed. Later on, other African countries will see support for this digital tender as well. Among the other countries on the agenda are Niger, Benin, and Mali, to name a few. Residents of all of these countries will have access to these digital instruments, which can be held in any mobile money or e-money wallet available today.
BRM CEO Alioune Camara stated the following:
“We are committed to bringing digital financial services and true financial inclusion to West Africa. We are very happy to announce the eCFA capability here. An eCFA backed by our banking system and the central bank is the safest and most secure way to enable the digital economy. We can now facilitate full interoperability between all e-money payment systems. This is a great leap forward for Africa.”
Keeping in mind how only a minor portion of Africa’s population has access to financial services, the move to a digital currency seems a bit strange. At the same time, this switch will improve financial inclusion in Africa as a whole. Moreover, by using the same digital currency across borders, interoperability between African nations can be improved. However, it is important to note the eCFA will not replace any existing fiat currencies available today.
The world as we know it is showing significant signs of digitization. Some parts of Africa are often considered to be well behind the curve in this digital age, but the adoption of mobile, digital money in Kenya, most famously Safaricom, indicates that African economies may leap ahead of others by issuing this new digital currency. Money is transitioning from physical to a more digital form and it seems to be only a matter of time until all financial transactions occur in digital format.
One thing to keep in mind is how only authorized financial institutions can issue this new e-money. Strong cryptography is used to ensure no one can counterfeit this digital currency, or compromise its existing supply. For now, it remains unclear how the central bank will keep track of these coins. That can either happen by using a database or distributed ledger technology.