E-cedi will be pacesetter for other cryptocurrencies
The Executive Director of eTranzact Ghana, George Babafemi, has urged the teeming youth with a budding interest in cryptocurrency to exercise patience for the Central Bank Digital Currency (CBDC) expected to be issued by the Bank of Ghana (BoG) to be rolled out first to set the tune and provide guidelines to regulate the space for risk management reasons.
According to him, crypto is a non-regulated investment instrument and can come down at any time; therefore, businesses must exercise patience until the CBDC is fully implemented. Though he agrees that the E-cedi may not be able to cross several borders like the cryptocurrency, it will operate in the same format and be safer to use in terms of risk measures as the issuer is known by all.
Meanwhile, best practice demands that one moves from a well-known territory to a lesser-known space and not the other way round – and applying this principle to the crypto or digital currency space will help address unforeseen challenges of risk and fraud.
“I am a strong advocate that the financial system be regulated or controlled, and I would like to say let’s exercise patience and allow the E-cedi to kick-start first because, at least, that will be the known – in the sense that we can easily identify individuals who control the system or are behind it.
“If this happens, then we can probably use the kind of policy framework from that to regulate cryptocurrency, rather than move from unknown to known. I agree that people are already using it to trade, but it is not being controlled or centralised and that is the behaviour of crypto; but I do not know how many governments in our part of the world will allow that, because it is very risky,” he said.
He also emphasised that every government is responsible for the economic policies of their country and would like to have control over what happens in the fiscal space; therefore, while he would not say they should ban cryptos, he urges potential investors to wait until the E-cedi has been rolled out.
The managing director made these remarks while speaking to B&FT on the sidelines of an entrepreneurship conference on the theme ‘Cryptocurrencies in Africa, opportunities, and implications for Ghana’, organised by the Chamber of Commerce and Industry (CCI) France Ghana.
Testing 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 number 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
Not long ago, the First Deputy Governor of BoG stated that the central bank’s digital currency, the E-cedi, will be piloted by close of this year – in a regulatory and innovation sandbox.
Within the financial sector, a regulatory and innovation sandbox is a supportive and controlled policy environment that enables firms to test innovative products, services and business models under the supervision of a regulator.