The second country in the world to develop a National Digital Currency
Senegal has recently become only the second country in the world to introduce a digital currency based on blockchain technology. Named eCFA, the digital currency will be legal tender just as the current currency, CFA Franc, is.
Senegal’s eCFA comes from a partnership by Banque Régionale de Marchés (BRM) and eCurrency Mint Limited, where BRM will issue the digital tender currency, the eCFA, in compliance with e-money regulations of the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), the Central Bank of the West African Economic and Monetary Union (WAEMU).
Interestingly, the only other country in the world with a national digital currency is also African – Tunisia. In late 2015, Tunisia became the first country in the world to offer its national currency to be transmitted through cryptocurrency based on blockchain, using a platform built by Monetas.
This push towards mainstreaming digital currency, along with other experiments using blockchain, further show that Africa is a fertile ground for the testing and deploying new FinTech solutions.
South Africa’s Reserve Bank, for example, shared a smart contract with a number of other financial institutions through the Ethereum blockchain network, and ABSA, a subsidiary of Barclays Africa, joined the international R3 Blockchain Consortium.
Fintech in Africa tends to take a more practical route towards adoption, with solutions coming up to fill a gap, such as M-Pesa meeting the need for financial inclusion and remittance services in Kenya in 2007. Building on the continent’s fintech innovations, startups have long driven growth in the sector, and it will be interesting to see how a regulator-driven initiative like this will play out.
After Senegal, WAEMU will introduce the eCFA in Cote d’Ivoire, Benin, Burkina Faso, Mali, Niger, Togo and Guinea-Bissau.
While the eCFA will use the blockchain to keep track of transactions, the digital currency is different from bitcoin in that it will be regulated by a central banking system. The eCFA would be issued solely by the central bank, but confer the benefits of transparency and cryptography to prevent counterfeiting and fake transactions.