In the Daily Graphic of July 12, 2021, the Bank of Ghana announced that it will pilot a digital currency called the e-cedi in September 2021.This is welcome news!

Government has been on an intense digital drive with amazing benefits. Drones are delivering medical supplies to families; we hardly queue to buy electricity; we can pay taxes online and now Bank of Ghana is set to take us higher on our digital journey with a digital currency if the pilot is successful. 

I expect the delivery of monetary policy to be more transparent as we progressively increase the use of digital and electronic currency while phasing out paper money and coins.

The fundamental reasoning for issuing the e-cedi, to my mind, will be aligned to modern day monetary systems; the e-cedi will serve as a store of value, a medium of exchange and a unit of account for pricing goods and services.   The e-cedi will be valid as legal tender. It will be accessible.  Just like paper money, coins and electronic money, households, businesses, and government will have an alternate and reliable means of holding currency.

An ancient jurist in the Roman Empire once said that the efficacy of a currency hinges on public confidence in the authorities’ management of the monetary system. I know some Advocates for private digital currencies may challenge this position because they believe in decentralizing currency.

However, the frequent fluctuations and high volatilities of private digital currencies are realities that cannot be avoided. In 2021 Ethereum, Stellar and Bitcoin were among the top volatile cryptocurrencies. One can gain value quickly but also lose value as fast. Planning for businesses can be a challenge. These concerns to a large extent justify the need for monetary authorities to regulate currency.

The Bank for International Settlements (BIS), a global institution that coordinates central banks to promote financial stability, has done some considerable work on Central Bank Digital Currencies (CBDCs).  In its Paper No 114 published in January 2021, BIS interviewed 65 Central Banks that formed close to 72% of the world’s population and 91% of global economic output.

They cut across central banks in both advanced and developing economies. Their responses indicated that despite COVID -19, many central banks are progressing steadily with their work on exploring CBDCs and many are moving into practical experimentation. Some of the benefits they expect at the retail end include enhanced payment systems and deeper financial inclusion in their respective jurisdictions.

Bank of Ghana announced its pilot on July 12,2021.The Economist Magazine announced shortly after in its July 17-23 edition that the European Central Bank has okayed the piloting of its digital currency as an alternative to crypto currencies. Bank of Ghana is taking a bold step.

The public will be eager to understand what tangible benefits the e-cedi will deliver as an alternative to other electronic and paper monies.

Large institutions will be keen to know if there is likely to be a wholesale version of the CBDC and whether it will have an interest-bearing feature.

Government will be keen to understand what challenges the implementation of the e-cedi could pose to our monetary and fiscal systems as well as how it will deepen financial inclusion. Questions as to how rural and underserved communities will access the currency, cyber security, data storage, internet access will require further stakeholder engagements.

There is no doubt Bank of Ghana will be up to the task given their track record. We wish them well on this pilot!