A few weeks ago, I wrote about the creation of an account on the Ethereum platform for a cross-border remittance service called CrypAfrica. The idea behind the account was to use that account as a testing ground for a potential Payment Service Provider (PSP) solution for East Africa. In the article, I mentioned that I was reaching out to a few key individuals in the region to learn how they would react to a potential PSP. I thought it would be interesting to follow up on one of the individuals who responded to me, namely Mr. Muhanna Abdah, a business leader in the region who is involved in banking and payments.
The goal for this blog post is to explore the potential use of a Central Bank Digital Currency (CBDC) in a regional payment system. The CBDC will be used as a means of payment for goods and services within the East Africa Community (EAC). The system will be fully auditable with the ability to provide a level of security for the transfer of digital assets.
Op-Africa is a new regional payment system that will allow remittance companies and banks to transfer money across Africa in a new way. Op-Africa is a “centralized” (or distributed) blockchain system that uses a standardized currency called Op-Bank Coins (OBTC). These coins will be pegged to the US dollar, and they will be used as a form of payment at all levels of commercial activity.Six East African countries are reportedly willing to explore the use of central bank digital currencies (CBDCs) as an alternative to their common payment system. The six countries, which are members of the East African Community (EAC), hope that the alternative will pave a path that will lead to the adoption of a common currency for the region by 2024.
The revelations about the EAC digital currency project follow a call by the EAC Secretariat for consultations on the feasibility study of the East African Payment System Modernization Project (EAPS). Since its launch in 2014, the SCEA has not functioned properly due to member states’ mistrust of each other’s currencies. In this context, the report indicates that the EAC will request the selected consultant to carry out an exploratory evaluation of these developments. The consultant also conducts research on emerging technologies and their application, including, but not limited to, technologies related to the use of central bank digital currencies (CBDCs).
Distrust between Member States
At the same time, the same report quotes the EAC Secretariat on some of the most important issues raised in the EAPS: The initial financing model, whereby participants borrowed other currencies from the EAC market to finance themselves, proved to be costly because the currencies of the partner states were not available on the local market. The Secretariat adds that the lack of central support for users means that it takes a long time to resolve system problems. This has a negative effect on the operation of the system. The fact that the system does not operate on a single platform also means that centralised management of cash and collateral is not possible, concludes the EAC Secretariat. According to the report, Kenya currently dominates transactions in the EAPC, which allows citizens of member countries to make and receive payments in regional currencies. The other five member states that will participate in the CBDC study process are Uganda, Tanzania, Rwanda, Burundi and South Sudan. What do you think of the EAC members’ plan to establish a CBDC? You can share your thoughts below in the comments section. Photo credit: Shutterstock, Pixabay, Wiki Commons Denial: This article is for information only. It is not a direct offer or invitation to buy or sell, nor is it a recommendation or endorsement of any goods, services or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author shall be liable, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services referred to in this article.
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