Senegal will soon begin using a digital currency, ushering in the use of blockchain technology by the central bank. It’s another opportunity for financial technology to help emerging markets leapfrog traditional banking systems and bring financial inclusion to more people.
If the Senegal roll-out is successful, the currency will be used in most of Francophone West Africa Cote d’Ivoire, Benin, Burkina Faso, Mali, Niger, Togo and Lusophone Guinea Bissau. Known as the eCFA, it is designed to operate alongside the CFA, the West African Franc. The eCFA will be issued by the regional bank Banque Régionale de Marché and will be used by countries in the West African Economic and Monetary Union, according to a statement.
The eCFA has been designed to work with existing mobile money platforms like MPesa, which have themselves been revolutionary for the millions of unbanked Africans. The e-currency will be produced with technology created by eCurrency Mint Limited, a company that enables central banks to create their own digital fiat currency, designed to be circulated alongside paper money as legal tender.
Just like paper money has a water mark, serial number and governor’s signature, these security features can be translated to a digital currency, explained Jonathan Dharmapalan, founder and CEO eCurrency Mint.
“By layering these together and binding them into a single instrument you have essentially created a central bank-issued digital currency,” Dharmapalan told a room at the Alliance for Financial Inclusion Global Policy Forum in the Mozambican capital Maputo in 2015.
The physical technology behind the currency is a digital currency production engine. In Dharmapalan’s presentation, the engine was a pyramidal structure with a tiny slot at the top. Each central bank will have their own engine, locked in a vault and kept offline. It will only be operational when the central bank wants to use it, he explained.
The advantages represented …