The Central Bank has once again assigned another important reason for the creation, pilot and subsequent rollout of its Central Bank Digital Currency (CBDC), the eCedi.
The eCedi which is currently undergoing a pilot phase in some parts of the country, aside helping to deepen financial inclusion and increase savings mobilisation among Ghanaians, is also to consolidate efficiencies derived from the Central Bank’s monetary policy decisions.
According to the Bank of Ghana, the eCedi will improve upon its transmission mechanism for effective monetary policy implementation.
This then seeks to imply that, the impact of a change in the policy rate by the Central Bank will result in an almost immediate reflection in interest rates on loans (for instance in a well developed cash-lite economy where loans are made digitally)
“The rapid adoption of digital technologies coupled with the introduction of a CBDC is expected to further consolidate the efficiencies derived from our fiscal operations and monetary policy decisions. As the future of the financial services sector evolves and the future of money is unknown or uncertain, the Bank’s decision to explore CBDC is a bold step to implementing the tenets of an overarching financial sector digitalisation program,” stated Kwame Oppong, Head of FinTech and Innovation Office at the BoG.
Mr Oppong made the above assertion delivering a keynote address on behalf of the Governor at the 2022 Institute of Chartered Accountants (ICAG) Conference on the theme, “The Future of Money: How the Digital Revolution is Transforming Currencies and Finance.”
Speaking further on the eCedi, Mr Oppong noted the rapid decrease in the use of bank notes and coins coupled with a less fully developed infrastructure to support the issuance of banknotes have invigorated interest in policy makers and financial sector authorities in the introduction of CBDC.
“Crypto assets continue to remain essentially speculative and attractive to smaller unit of investors. The use of any privately issued form of currency generally lack a strong consumer base needed to create the network externalities which is capable of dethroning a fiat currency or legal tender,” he added.
According to Mr Oppong, the eCedi amongst others is to;
- complement existing bank notes and coins as issued by the Bank of Ghana;
- promote diversity in payment system whilst maintaining the safety and robustness of the space.
- provide a better alternative to newer forms of digital payments (such as Bit coins, Ethereum or Tether) which are neither the liability of the Bank of Ghana or any regulated financial institution;
- improve security and convenience for cash holders.
- enhance financial inclusiveness as a means to improving transmission mechanism for effective monetary policy implementation; and
- improve efficiency in cash management as current activities, processes and procedures for managing currencies are very time consuming and very costly.
Speaking further on the theme of the Conference, Mr Oppong noted the rapid adoption of digital financial technology, technological innovations, increasing interconnectedness among payment service providers and banks as well as the existence of an enabling regulatory environment has stimulated the growth and participation of non-banks financial institutions within the payment and financial ecosystem.
Adding that, the participation of these entities to offer exciting digital technologies to meet customers’ derived demand for safe, convenient and reliable digital financial products and services has been overwhelming.
Source: norvanreports
