Regulatory dilemma makes BoG resolute against cryptocurrencies

Local bondholders
Dr. Ernest-Addison, Chairman of the Monetary Policy Committee and Governor of the Bank of Ghana

Digital currencies and assets taking different forms and not being controlled by any mandated global body or institutions is creating a continuous dilemma for establishing a regulatory regime for monitoring cryptocurrencies, Head of Financial Technology (Fintech) and Innovation at the Bank of Ghana (BoG), Mr. Kwame Oppong, has said.

Mr. Oppong maintained that privately issued digital tokens such as Bitcoin and cryptocurrencies are different from tokenised digital currencies such as the e-cedi, which is controlled by the BoG.

Addressing participants at the virtual Absa-UPSA Law School Quarterly Banking Roundtable VII, he said the distinction between other digital currencies and the BoG’s e-cedi is that issued currencies from the central bank remain a liability of the BoG. However, other virtual currencies including bitcoins and cryptocurrencies do not fall under the Bank’s accountability purview.

He explained that there is a natural friction between these privately issued digital currencies and the requirements central banks are looking at.

Indeed, central banks are supposed to formulate monetary policies to ensure price and financial stability – but that is impossible within the context of cryptocurrencies – since one of the primary tools with which central banks control the policy environment is the supply of money.

“So, now you have a parallel production and supply of money that is not controlled by a centralised authority but by a network of computers running independently. This gives no flexibility for the BoG to be able to control the supply of money in the context of crypto regulation,” Mr. Oppong emphasised.

He said cryptos which are privately issued tokens are however very fascinating technology innovations, with some phenomenal cryptography backing them for safety.

“The decentralised approach, a whole block-chain and distributor ledger backing cryptos obviously adds value to users. But the honest question to ask is, what is the purpose as a central bank of being able to understand and situate it within the current environment?” he questioned.

In 2018, the BoG issued a directive on digital and cryptocurrencies, saying these currencies are not regulated and as such banks and payment services must not trade in them.

Mr. Oppong however said there is also recognition of the underlying technology of these virtual assets, acknowledging that they are sophisticated in their potentials but offer no protection, adding: “You can have it, but understand that it is a personal risk.

“We see significant growth in money laundering at the global level which is coming through that channel, and this calls for critical understanding of this perspective,” he said.

The Central Bank Digital Currency (CBDC), he explained, is therefore designed as an alternative to enhance the cash-lite agenda of the economy.

Chief Risk Officer of Absa Bank Ghana, Mr. Adolph Kpegah, at the forum said Absa bank will support government’s bid to digitise the system in favour of banks.

“Banks are willing to change and adapt to technology in order to integrate and transact business digitally, and to trade with a central bank-backed digital currency. The banking sector is one of the industries that has wholly embraced the use of digital tools in service delivery,” he added.

The Absa-UPSA Law School Quarterly Banking Roundtable VII was on the theme ‘Digital Currencies, Regulated Banking and the Future of Money’.

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