First Deputy Governor of the Bank of Ghana, Dr. Maxwell Opoku-Afari, has revealed that the central bank’s digital currency, the e-Cedi, will be piloted by the close of this year – in a regulatory and innovation sandbox.
Within the financial sector, a regulatory and innovation sandbox is a supportive and a controlled policy environment that enables firms to test innovative products, services and business models under the supervision of a regulator.
In an address at a financial literacy training workshop, organised by Journalists for Business Advocacy (JBA), the First Deputy Governor said: “Leveraging financial innovations, the Bank of Ghana has also initiated processes for a pilot central bank digital currency to further move the economy toward a cash-lite environment. The piloting phase will be determined by the programme framework, which we will try to finish by the end of September 2021. Definitely, this CBDC will be introduced [sandbox piloting] before end of the year”.
He added: “We anticipate that the Bank’s CBDC project will further advance financial inclusion, promote efficiency and stability of the payment system, and foster competition in the financial sector”.
The start of this process has turned out to be imperative in the presence of COVID-19, which has brought radical changes – whereupon digital means of payment have become the best option for financial transaction.
The testing of concepts such as the central bank’s digital currency – also called digital fiat currencies or digital base money – will act as a digital representation of the country’s fiat currency and be backed by a suitable amount of monetary reserves like gold or forex. CBDC is specifically designed to bring about the best of both worlds – the convenience and security of a digital form like cryptocurrencies, and the regulated, reserve-backed money circulation of the traditional banking system.
The regulatory sandbox-based approach has been adopted by central banks across the world in order to ensure oversight regulation and protection of consumer interests. This allows authorised businesses to test their innovative products, services, business models and delivery mechanisms in the real market, with real consumers, on a trial basis.
Market experts have expressed the importance of this development, as it will help reduce the time to market at low cost; improve; access to capital; and ensure adherence to compliance requirements.