Giesecke+Devrient plans more African digital currencies as Ghana pilot continues

By David Whitehouse
Posted on Thursday, 21 July 2022 06:00

Man trades U.S. dollars for Ghanaian cedis at a currency exchange office in Accra
Reduced forex revenues are among the risks to banks from e-cedi introduction. REUTERS/Francis Kokoroko

German payments solutions provider Giesecke+Devrient (G+D) is planning further central bank digital currencies in Africa as preparations for the launch of the digital cedi in Ghana continue.

The company has been awarded a new project for a central bank digital currency (CBDC) in an unnamed African country, Wolfram Seidemann, CEO of G+D currency technology, tells The Africa Report. The company is in discussions with central banks across all parts of the continent, he says.

The project awarded outside Ghana will be announced in about six months, Seidemann says. The agreement for the initial design phase has been signed, and he hopes this will lead on to pilot and rollout phases.

Central bank digital currencies are a digital form of a country’s money, with supply determined and regulated by the central bank. South Africa, Nigeria, Tunisia and Senegal are among African countries reported to be considering their use. The Bank of England has said that a digital currency can increase the GDP of a country by up to three percentage points by lowering the costs of transactions and transfers.

  • The Bank of Ghana in August 2021 partnered with G+D to pilot Africa’s first CBDC. The ‘e-cedi’ is intended to complement rather than replace physical cash, and the pilot project to date has shown “very fast” adoption of the e-cedi, Seidemann says.
  • The task of integrating the currency with existing infrastructure such as interbank payment systems is likely to be complete by the end of this year, at which point the government will be able to decide when and how to proceed, he adds.

Risks for banks

As well as online payments, offline use of the currency will also be possible using a smartcard. The solution can become a “benchmark for private payment solutions,” Seidemann says. “No other digital currency can reach such a wide user base. We want to reach every citizen.”

The Bank of Ghana sees a contribution to GDP growth from the project as more businesses gain digital capability. Access to banking and microcredit will be improved by the currency’s introduction, with banks able to evaluate the creditworthiness of people currently outside the financial net, Seidemann says.

Central bank digital currencies will also give Ghana and African governments new policy options to support targeted parts of the economy, he argues. The use of the e-cedi is planned to be unrestricted, but governments could create and issue restricted wallets for payments for specific purposes such as education. That provides another tool in addition to tax systems to support targeted areas of national economies, he argues.

The introduction of a retail CBDC would lead to a fall in demand for unregulated cryptocurrencies such as Bitcoin, protecting users from their volatility, according to a paper from Dataking Consulting in Accra in June. There is also a risk of stress on the banking system, the paper argues.

  • Customers may be more willing to carry out financial transactions without keeping deposits with banks, and CBDCs are likely to cut revenue of commercial banks from the forex business, Dataking says.
  • “The use of CBDCs has the potential of exacerbating bank runs in periods of financial stress,” Dataking Consulting argues. In times of economic downturns or financial crisis, there is a “higher likelihood of bank runs as depositors will quickly move their funds to CBDCs”, which are seen as safer avenues.

Bottom Line

Ghana’s current economic stress increases the risks to banks of a quick national introduction of the e-cedi.

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