The eight member countries of the West African Economic and Monetary Union (WAEMU) could soon share their own digital currency, the eCFA. Once fully implemented, it will operate alongside the region’s hard currency, the CFA, as official legal tender.
The eCFA will be issued by regional bank Banque Régionale de Marchés (BRM) in compliance with the digital money regulations outlined by the economic grouping’s central bank, the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO). BRM has partnered with eCurrency Mint – a Dublin-based company that specialises in creating digital currencies for central banks – to produce the technology behind the eCFA. Distribution has already began in Senegal and consumers will be able to transact with it across all existing payment platforms. If successful, the eCFA will then be rolled-out to WAEMU’s other member states: Cote d’Ivoire, Burkina Faso, Benin, Togo, Mali, Niger and Guinea-Bissau.
“An eCFA backed by our banking system and the central bank is the safest and most secure way to enable the digital economy,” said Alioune Camara, CEO of BRM in a press statement.
“We can now facilitate full interoperability between all e-money payment systems. This is a great leap forward for Africa.”
With the vast majority of the region’s population lacking access to banking infrastructure, digital currencies could leapfrog current barriers to financial inclusion.
“It enables much greater access to financial services,” says Ian Merrington, CEO at the Cape Innovation and Technology Initiative (CiTi).
“Quite often with paper currency one needs some kind of physical access to a bank, institution, teller machine or teller to actually be able to withdraw and make a transaction. So the immediate ability that a digital currency gives one is the ability to transact on a mobile device, as an example – where one does not physically have to present tangible items such as a bank note as a means of payment or redemption.
“So it does enable people to have a transactional capability and also possibly [access to] remittances where they are in remote areas or areas that are well underserviced by banking.”
Yet despite their transformational potential, digital tenders (such as the cryptocurrency bitcoin) have been generally slow to take off in most African markets. According to Merrington, this is typically a result of restrictive regulations.
“It does require the legislator to actively open that door – which is why we don’t have more of it. And on the counterbalanced side there is a lot of vested interest in it not becoming a big thing because it displaces legacy players in the market.”
For this reason, Merrington refers to BCEAO’s support of the implementation of the eCFA as “very liberal, very forward thinking and very empowering”. However, it is not the first central bank to take these steps. Countries, such as Ecuador and Tunisia, have also issued national digital currencies.
“My personal belief is it actually becomes a social imperative for the regulators to free up the market and make it easier for digital currencies to exist to enable the unbanked, who are by far the majority on the continent, to have access to financial services,” adds Merrington.
Sonya Kuhnel, managing director of the Blockchain Academy, agrees. She says that central bank-supported digital currencies also offer a more efficient and cheaper legal tender, adding that for countries such as Zimbabwe – which recently introduced its bond notes – it might be a better solution than printing hard currency.
“But I think a lot of central banks are sceptical of using digital currencies because of the money laundering and terrorist financing that is supposedly happening with digital currencies,” she explains.
A lack of consumer trust is also a limiting factor facing digital currencies in Africa. Many consumers don’t even trust traditional banks with their money, and widely prefer to transact with cash. However, Kuhnel says that if central banks create more enabling environments for digital currencies, usage – followed by trust – is likely to rise.
“Once the central banks start issuing digital currencies it means the retailers can now use payment systems that issue digital currencies as a token of value. Regulation wise, it is then endorsed,” she adds.
“And because the central bank is saying it is now okay to use digital currencies, it means people are going to adopt and trust digital currencies on a greater scale.”