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How Feasible Is The Creation Of A Central Bank Digital Currency in Africa?



Central Bank Digital Currencies
Source: Bitfxt (Image was modified)

The invasion of blockchain applications, predominantly via cryptocurrencies, has flooded the African and global financial space with a myriad of groundbreaking possibilities that hold a promise of reaching the realm of an entirely decentralised financial system. This invasion is, however, a threat to traditional banking giants, especially the Central Banks, as this strips them of the central control they possess. In a bid to level the playing field and regain control without completely stifling the innovation that blockchain offers, central banks in Africa are opting for the creation of a Central Bank Digital Currency (CBDC). Some financial analysts speculate that this move can potentially push the continent closer to embracing blockchain, although this shatters the promise that blockchain holds for a decentralised financial future.

What exactly is a Central Bank Digital Currency?

A Central Bank Digital Currency is simply fiat money embodied in digital flesh and is issued by the Central Bank of a nation. This puts it under the control of a central authority.

Findings from a 2020 survey by the Bank for International Settlements revealed that about 20 percent of the world’s population could access CBDCs within the next three years. Quite a number of nations are already conducting extensive work on CBDCs to make this possible.

In 2019, North African nation, Tunisia, was reported by Russian news agencies, Tass and, to have created the world’s first Central Bank Digital Currency, eDinar. Although this was denounced a few days later by the Central Bank of Tunisia(BCT), via a press release, the bank revealed its plans to create a digital currency that is backed by the Central Bank. “The BCT is presently working on finance digitalisation, in its digital currency dimension and not the one involving cryptocurrency. Its departments are considering the opportunities and risks inherent to these new technologies, notably as regards cyber security and financial stability,” the press release stated. This statement by the BCT indicates that the news of a Tunisian CBDC may, in no time, actually be brought to reality. 

Prior to the false news of Tunisia’s Central Bank Digital Currency, Senegal had experimented with digital alternatives that mimicked cash. In 2016, a regional Senegalese bank, Banque Régionalede Marchés (BRM), proposed the eCFA, a digital currency which was reportedly backed by Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), the Central Bank of West African Economic and Monetary Union(WAEMU), which Senegal is a part of. Although the eCFA would later fail, it helped Senegal and the entire continent learn about some of the obstructions that would arise in the creation of a Central Bank Digital Currency or anything like it. The aftermath of the eCFA project also revealed the stance of the region’s Central Bank on the creation of a Central Bank Digital Currency. 

According to a report by Bloomberg, the region’s Central Bank claimed it had no involvement with the creation of the digital currency and would never consider doing so. While other nations contemplate whether to experiment with a Central Bank Digital Currency, the Central Bank of the region has clearly distanced itself from any agenda of such, at least for now. 

READ ALSO: Senegal’s Digital Currency – eCFA: Four Years in Retrospect

The buzz around the creation of a Central Bank Digital Currency happens to catch the interest of the Central Bank of Eswatini in Southern Africa. In 2019, the bank conducted the first phase of a four-phase diagnostic study to determine the possibility of a Central Bank Digital Currency in Eswatini. The outcome of the first phase showed that  a Central Bank Digital Currency in Eswatini has three potential use cases, in decreasing order of perceived strength, which includes: payment system efficiency and functionality;  deepening consumer demand and usage of  digital financial services; economic policy strengthening. These results are positive, and the bank is encouraged to continue with the other three phases of the study before it decides on whether a Central Bank Digital Currency will be created in Eswatini.

Crypto-friendly country, South Africa, as expected, has shown interest in the development of a Central Bank Digital Currency. In May 2019, the South Africa Reserve Bank(SARB) announced its plans to conduct a feasibility study on a Central Bank Digital Currency for the country. The bank also invited interested parties to join the feasibility project. The SARB is also considering possible challenges to a Central Bank Digital Currency and how to address them. These challenges include: how to circulate the Central Bank Digital Currency without affecting the supply of the South African Rand; how to manage a financial system driven by a Central Bank Digital Currency without hurting commercial banks, since the creation of a Central Bank Digital Currency will give the public direct access to funds which are issued by the Central Bank.

In a way, this leaves almost nothing left for the commercial banks to do. The bank is also putting efforts into solving other issues that surround the creation of a Central Bank Digital Currency in South Africa. This is a major trigger to the bank’s invitation to stakeholders and private companies on the best way to launch a Central Bank Digital Currency in the country without adversely affecting the nation’s already existing banking system.

Central Bank Digital Currency in Africa ; Is it Possible?

Although cash still remains king in Africa, the only way to find out if a Central Bank Digital Currency could possibly dethrone cash is to try it out. Putting into perspective the handful of African countries that have considered creating a Central Bank Digital Currency, its feasibility within the entire continent can only be substantially determined when a majority of African countries experiment with the development of a Central Bank Digital Currency. Their findings will unravel how possible its adoption will be in Africa. Nevertheless, this does not sideline the significance of the disposition of the African populace on the adoption of a Central Bank Digital Currency in Africa, and this is largely subjective. Perhaps, the reign of cash as king may soon be coming to an end in Africa. The possibility, however, is dwindling. 


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Kehinde is a driven human who is passionate about leveraging technology to transform the future of humanity and the way we all live. His interest lies in constantly getting valuable information and being part of a mission that seeks to create a transformative radical shift.

Crypto Assets

Crypto prices drop as global market fear increases



Top cryptocurrency prices have fallen amidst a drop in stocks and fears over China’s Evergrande debt crisis. In the last 24hour, Bitcoin dropped from $47,772 to $42,630 shedding about 8.58%. this is the lowest in price since another bull run began on Sept 5 after the April crash.

El- Salvador’s President, Nayib Bukele sees the fall as an opportunity to invest more. Recall that the country adopted Bitcoin as a legal tender on September 7. Despite the adoption, the price of Bitcoin has fallen by almost 14% since then.

Other coins have experienced dramatic crashes within the last 24hours. Solana, a coin that has experienced 355% growth within the last 3 months fell from $162 to $130 shedding about 11.39% within the last 24hours. Solana’s fall may be categorized by the 17-hour outage which the founder, Anatoly Yakovenko said was caused by bots “flooding the networks”

Ethereum fell by 9.37% while Dogecoin and Axie Infinity fell by 11.22% and 14.14% respectively within the last 24hrs hours. While crypto experiences dark Monday, El-Salvador keeps investing more money in Bitcoin.

A look at the global market

The global market is experiencing fear due to the Evergrande debt crisis. A report published by the University of Michigan shows that consumer’s sentiment is beginning to decline. This trend alone may impact the crypto market as well.

On the other hand, the global market downturn must have been spurred by the Evergrande debt crisis. The company grew to be one of China’s biggest companies by borrowing more than $300bn. Last year, Beijing made rules to control the debt owed by big real estate developers. This led Evergrande to offer its properties at major discounts to raise more money to keep the business afloat. Right now, the company is struggling to meet the interest on payment of debts.

Why would it matter if Evergrande fails?

The collapse of the multi-million dollars company would affect the global market; including the crypto market. Many people bought properties from Evergrande and they expect to make gains. If Evergrande falls, crypto investors will be forced to withdraw more money to keep their business running without the means to invest more. When one business fails, the other gets affected indirectly. This also applies to other firms that do businesses with Evergrande.

The potential impact on China’s financial system is another effect of Evergrande’s fall. In his statement to BBC, Mattie Berkink, the Economist Intelligence Unit (EIU), said that “the financial fallout would be far-reaching. Evergrande reportedly owes money to around 171 domestic banks 121 other financial firms” if the company fails, other lenders or businesses may be forced to lend less. Thereby leading to a credit crunch- a situation where companies struggle to borrow money.


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Bitcoin in Africa

The rise of CBDC in African economies



Many nations have taken cues from the world of crypto and its resounding successes over the last decade. In order to avoid getting left behind, governments worldwide are increasingly turning their attention towards implementing some form of digital currency, a CBDC which in full is Central Bank Digital Currency. Although inspired by cryptocurrencies, CBDC’s are quite different from traditional crypto platforms. The main differences are that CBDC’s are unlikely to be decentralized, the supply of this currency regulated by the host’s country’s central bank as the CBDC is designed to operate as a sovereign legal tender, the digitized form of the host country’s fiat currency. Thus, a central bank may issue digitized tokens of its currency of which their value is pegged to the fiat currency of the nation in question, making CBDC’s stablecoins.

Africa has seen a rise in the use of cryptocurrencies and it’s still pushing frontiers in this sector. Although the use of crypto in many African nations is becoming more and more pervasive by the day, the tone of governments in many of these countries toward the sector is cautious at best and threatening at worst. However, a few nations have voiced interests in creating digitized versions of their legal tender to function as a CBDC. Amongst these are Ghana, Nigeria, Morocco, Kenya and Tunisia.

Many of these projects are still in the research phase or developmental phase however. A good example is Ghana’s proposed CBDC, the E-cedi being developed in partnership with German company, Giesecke + Devrient. Nigeria’s CBDC project, the eNaira has been announced and according to Nigeria’s central bank, this CBDC will be launched sometime in 2021. To that end, the CBN has partnered with fintech company, Bitt Inc. to serve as the technical partner in the eNaira’s development. Reportedly, the CBN had made the decision to digitize the Nigerian Naira in 2017.

While the pursuance of digital currencies in African nations is a welcome development, implementation of these schemes isn’t without challenges. Chief among the issues countries in Africa face would be the already existing financial service inequality and poor penetration of internet access in the continent. These challenges must be tackled in order to allow for mainstream adoption of CBDCs and the subsequent provision of financial inclusion. The benefits largely depend on the peculiarities of the nation deploying them. For instance, a digital currency is thought to help Nigeria increase foreign remittances, it’s second largest source of forex after oil. Whatever the outcome of these projects, it is becoming apparent that CBDC’s have come to stay.

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Decentralize Brief

Bitcoin trades above $51k ahead of El Salvador’s adoption



Bitcoin growth

Bitcoin price has rallied above $51,000 ahead of El Salvador’s adoption. The immediate surge in price may be due to the social media campaign that everyone should buy sats of Bitcoin to support El Salvador’s plan to make the coin a legal tender or it may be due to the news of El Salvador’s adoption of the coin as a legal tender on September 7. Users of social media platforms like Twitter and Reddit are discussing how they will buy Bitcoin of $30 each to mark the new El Salvador Bitcoin law.

The surge in Bitcoin’s price began in the last 24hrs with the price rallying around $51,955 with a 3.37% increase. This is an all-time high after the April crash that brought the price of Bitcoin from $64k down to $28k. The move by El Salvador to be the first country that accepts Bitcoin as a legal tender and the social media campaign that leads to a surge in price ahead September 7 are a repetition of events that occurred late last year and early this year with regards to institutional investors and how the price of Bitcoin skyrocketed.

El Salvador, a country in Central America, has been preparing heavily to adopt Bitcoin by installing ATMs to allow citizens to convert the token into US dollars. Last week, the country’s Legislative Assembly passed a law to allow for the creation of a $150m Trust to support the conversion of Bitcoins to US dollars.

To promote the use of Bitcoin, the government states that it will give the adult population of El Salvador $30 in Bitcoin once they download “Chivo” the wallet issued by the government. This was confirmed by the Finance Minister, Alejandro Zelaya.

What this means for Bitcoin investors

Apart from the adoption by Salvadorians, on-chain analytics show that Bitcoin is in high demand. The fourth halving that occurred will make Bitcoin become a scarce token in the nearest future. Thereby increasing the price sporadically.

With El Salvador’s interest in Bitcoin, other countries are likely to follow suit- Panama is considering following El Salvador’s lead. History will repeat itself as this development will serve as another crypto rout that occurred early this year when Tesla and MicroStrategy announced their support for Bitcoin.

El Salvador’s new law allows the use of Bitcoin as a legal tender it can be used to buy goods, pay for taxes and bank loans. This means more demand for Bitcoin, with the fourth halving that occurred, it means less supply. A common rule of economics for demand and supply will apply. Prices are projected to keep rising. At the time of writing this report, Bitcoin is trading at $51,839 with a projection of $52k before the end of today and higher tomorrow when Salvadorians begin to use the token.

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