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Senegal’s eCFA: Four Years in Retrospect



Image Credit: Issouf Sanogo/Afp via Getty Images/ Image was modified.

In 2016, Senegal became the second country in the world to launch a national digital currency, the eCFA, but there are many stories attached to the precious currency and its fiat predecessor, CFA.

History of CFA

The CFA franc was created in December 1945, when the French government ratified the Bretton Woods Agreement. It became the currency of les colonies françaises de l’Afrique or the CFA (“French Colonies of Africa”).

The CFA was later split into the Communauté Financière d’Afrique (“Financial Community of Africa”) which included the West African countries: Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo, and the Communauté Financière de l’Afrique Centrale (“Financial Community of Central Africa”) including Cameroon, the Central African Republic, Chad, the Republic of the Congo, Equatorial Guinea, and Gabon.

The French Treasury guaranteed the currency under a fixed exchange rate on the account that the two central banks – the Central Bank of West African States (BCEAO) and the Bank of Central African States (BEAC), deposit 50% of their foreign exchange reserves in a special French Treasury ‘operating account’.

25 Franc coin issued in 2003 by BCEAO
25 Franc coin issued in 2003 by BCEAO

The CFA Franc is the name of two effectively interchangeable currencies – the West African CFA Franc and the Central African CFA Franc – which are used by the fourteen African nations. 

CFA countries, in the last 50 year, have enjoyed a more stable economy and higher growth figures, compared to the rest of Sub-Saharan Africa; but the price they pay for it is essentially having no control over local interest rates or the money supply— the monetary policy couldn’t be used to influence the economy. There is no doubt that the French created the CFA as a neo-colonial measure to control the resources, economic structures and political systems of their former colonies.

There have been several controversial remarks around the French stronghold on CFA countries, an example is a provocative statement made by Luigi Di Maio, Italy’s former deputy prime minister and current minister of foreign affairs, whilst commenting on the role of the CFA franc on Africa’s development, saying “France is one of those countries that by printing money for 14 African states, prevents their economic development and contributes to the fact that the refugees leave and then die in the sea or arrive on our coasts.”

Eight francophone countries of the CFA: Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal and Togo joined the six English-speaking ECOWAS countries: Nigeria, Ghana, Gambia, Liberia, Sierra Leone and Guinea to form a monetary union. They made plans for an ECOWAS-wide currency called the Eco in 1999. Rather ambitiously, they aimed to launch it in 2000 but till date has not been executed yet.

The agreement says that all countries must meet certain requirements before the Eco is formed. Conditions include having less than 10% inflation and a budget deficit that is less than 3% of GDP, only Togo has met the criteria. 

The launch of eCFA

The media went on a frenzy when reports came out that Senegal, a West African nation, intended to launch its own national digital currency, the eCFA. The country was set to follow suit after Tunisia, which launched its Digital currency, the eDinar, on the blockchain.

Senegal’s digital currency ‘eCFA’ launched in December 2016 to co-exist as a legal tender alongside the recognized fiat currency, CFA Franc, whilst holding an equivalent value.

The launch of Senegal’s eCFA was a result of a collaboration by Banque Régionale de Marchés (BRM), a local Senegalese bank and eCurrency Mint Limited, a Dublin-based company that specializes in creating digital currencies for central banks to operate alongside notes and coins. BRM issued the eCFA, in compliance with e-money regulations of Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), the Central Bank of West African Economic and Monetary Union (WAEMU).

Basically, the issuance of the eCFA is totally controlled by the Central Bank, as they own the production through a digital currency production engine meant to be kept offline until when needed, as explained by Jonathan Dharmapalan, founder and CEO eCurrency Mint, at the Alliance for Financial Inclusion Global Policy Forum in the Mozambican capital, Maputo, in 2015.

Just like paper money has a watermark, serial number and governor’s signature, these security features can be translated to form a digital currency operating under the principles of an existing paper currency ’ said Jonathan.

However, it is quite unclear what kind of distributed ledger technology eCFA uses, as BRM revealed very little about the technical details of the digital currency. Skeptics criticized eCFA’s dependence on a centralized banking system, which defeats the purpose of decentralization of digital currencies.

The rise in the interest of Central Banks issuing e-currencies whilst using the technological features of cryptocurrencies is a calculated move to maintain their role as a sole issuer of national currencies, so as to not handover control to ungovernable blockchain currencies like Bitcoin before they gain popularity.

The feasibility of eCFA

Considering the low financial inclusion rate across Sub-Saharan African where less than 40% of the population have access to banking services, loans and savings, mobile money solutions have seen tremendous growth and acceptance over the last ten years, with the most successful one being the Mpesa in Kenya, which currently operates in over 10 countries.

Banks often demand a series of document requirements to open a bank account, which majority of the African population do not have. Mobile money instantly struck a chord with these set of people.

These mobile money solutions allow users mostly of marginalized demographics, to own a ‘virtual account’ pegged to their phone number, they can easily load their accounts at local mobile money agents with cash and enjoy seamless and cheap transactions without the need of an internet connection or a bank account but rather just dialling codes on their phones.

eCFA was termed as another opportunity for financial technology to help emerging markets leapfrog traditional banking systems and bring financial inclusion to more people.

In a joint statement, the BRM and eCurrency Mint stated that the “eCFA is a high-security digital instrument that can be held in all mobile money and e-money wallets. It will secure universal liquidity, enable interoperability, and provide transparency to the entire digital ecosystem in WAEMU (West African Economy and Money Union).

There are tons of Fintech solutions trying to bridge the financial inclusion gap with Mobile money solutions such as Mpesa, Airtel money, Orange etc. However, they all exist on different platforms, thereby, leaving no space of interoperability between them. An Mpesa user cannot send money to an Airtel money user.

The eCFA was designed to work with existing mobile money platforms, ticking it for a higher chance of success. The digital currency was regarded as an experiment using blockchain technology to show that Africa is a fertile ground for testing and deploying new Fintech solutions.

The proposed success of eCFA was planned to see the digital currency being used in most of Francophone West Africa – Cote d’Ivoire, Benin, Burkina Faso, Mali, Niger, Togo and Guinea Bissau.

Was the experiment a success?

In a report by Bloomberg, The Central Bank of West African States distanced itself from plans to introduce a digital currency in Senegal, saying it was not involved in the project and would not consider doing so.

The Central Bank, in a statement on its website, warned the issuing bank, BRM, against the use of the term: “eCFA”, in order “to prevent any kind of confusion with the legal currency” in the region. 

Although the exact reason for the decision was not given, the institution vehemently stated that it was not considering creating a digital currency in any of its member states. 

A deeper insight into the project reveals that it might have been a short-lived one, considering that digital currencies do not require its users to provide any personal information. Bitcoin, for example, only requires an internet connection and a smartphone for anyone to carry out transactions.

The eCFA, a Central Bank Digital Currency, would have come with the same regulatory headaches of traditional finance— the need for KYC procedures and documents, one of the limiting factors currently hindering the population from owning a bank account. 

Like most West African countries, where financial inclusion and access to banking services is still lagging, the eCFA could have a substantial impact on Senegal and beyond by providing them with a secure, reliable, and cost-efficient means of sending, receiving, and storing funds.

There has been no latest report on the development of the eCFA ever since the statement by The Central Bank of West African States.

Have all hopes been shattered?

Probably not. The eCFA might have not gained the desired traction but another project is keeping the hopes of a widely used digital currency in Senegal, alive.

Popular Senegalese American singer, Akon, is set to launch Akoin, a cryptocurrency that will be the local currency in Akon City, a $6 billion 2,000-acre wide city (currently under construction) in Senegal.

The singer had some problems exchanging CFA franc to the Euro at a currency exchange counter in France, despite the history of France and the CFA Franc. 

“We have to have our own currency”, he said.

Akoin is built to be a utility token (that is, one that has a specific use), not an investment tool; Karas, Co-founder of Akoin said.

However, irrespective of these numerous hurdles, Senegal still remains a major hotbed for the adoption of digital currency in Africa. 



Nigeria’s Central Bank Digital Currency e-Naira Gain Traction




According to Governor Godwin Emefiele, the Central Bank of Nigeria’s (CBN) digital currency, the eNaira, which was officially revealed on Monday, has garnered immense interest and a positive response from both within and beyond Nigeria, with 33 banks fully integrated on the platform. The CBN has successfully minted $500 million, with N200 million going to financial institutions, according to Emefiele, who spoke at President Buhari’s historic launch in Abuja.

In addition, over 2,000 clients have been added to the eNaira platform, and over 120 merchants have successfully enrolled. Since its launch, the eNaira website has had approximately 2.5 million daily views. Customers who download the eNaira Speed Wallet App will be able to complete the onboarding process and build their wallet, locate their eNaira wallet from their bank account, transfer eNaira from one wallet to another, and make payments at registered merchant locations.

In terms of maintaining a robust payment system, the Central Bank of Nigeria (CBN) feels that the eNaira will make a big difference to Nigeria and Nigerians. The eNaira will also lower the cost of processing currency, allowing for more direct and transparent welfare interventions for citizens, as well as increased revenue and tax collection, easier diaspora remittances, lower the cost of financial transactions, and improved payment efficiency.

Governor Godwin Emefiele outlined these advantages during the historic debut in Abuja, saying that Nigeria’s Central Bank Digital Currency (CBDC) is the first in Africa and a digital version of the actual Naira. 

What is eNaira?

The eNaira is the same Naira with considerably more possibilities, Emefiele asserted emphatically, guaranteeing that the new payment system is one of the most robust in the world, sufficiently safeguarded, and thus nothing to worry about.

In 2017, the Central Bank of Nigeria (CBN) began an intensive study, consultations, identification of use cases, and testing of the CBDC idea in a Sandbox environment, in response to increased interest in Central Bank Digital Currency (CBDC) around the world.

The goal of the study was to provide a strong argument for the introduction of a digital currency in Nigeria so that all Nigerians can benefit from a more successful and inclusive economy.

Following the completion of preliminary research, the CBN’s researchers and experts were able to clearly establish that a digital currency will promote a more paperless, inclusive, and digital economy, complementing the successes of prior policy initiatives and our rapidly increasing payment systems.

As a result, the CBN decided to create its own CBDC, dubbed the eNaira. Like the physical Naira – eNaira is a legal tender in Nigeria and a liability of the CBN, which will have the same value and always be exchanged at 1 naira to 1 eNaira

To reduce the risk of the process, the CBN has carefully considered the entire payments and financial architecture, and has structured the eNaira to complement and improve these ecosystems, as well as implementing security protections and policies to ensure the financial system’s integrity.

To maintain the integrity and stability of Nigeria’s payment system, strict adherence to anti-money laundering and counter-terrorist financing regulations would be enforced, according to Emefiele.

The eNaira, like other digital revolutions, is a journey, and Nigerians should expect more features in the coming months. Accessibility and onboarding of consumers without BVN, as well as the usage of the eNaria on the phone without access to the internet, are among them. 

Nigeria will be one of the first countries in the world to implement the CBDC using USSD on phones, bypassing the need for internet access. The CBN also plans to use the eNaira platform to onboard revenue collection agencies in order to increase and simplify collections, as well as to create sector-specific tokens to support the Federal Government’s social programs and distribution of targeted welfare schemes in order to lift millions of people out of poverty by 2025.

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Market Watch

Jack Dorsey‘s Square to develop open source Bitcoin mining



Jack Dorsey Bitcoin

On Friday, October 15, Twitter CEO Jack Dorsey announced that American fintech company, Square, would be looking to get into Bitcoin mining. Jack Dorsey who is also Square’s CEO announced this on Twitter which subsequently sent waves through the bitcoin market, surging its price to almost a record high, rising over $62,000 over the weekend. According to the Twitter boss, Square is looking to building an open source Bitcoin mining system that would be available to individuals and businesses.

Sharing his thoughts further on the initiative, he stated that “Mining needs to be more distributed” and that “the more decentralized [mining] is, the more resilient the Bitcoin network becomes. He also mentioned the apparent inaccessibility of mining stating that “Bitcoin mining should be as easy as plugging a rig into a power source.

Dorsey also believes that bitcoin mining “needs to be more efficient and that “clean and efficient energy use” would be undoubtedly beneficial to the digital currency in the long run.

Dorsey ended the thread by saying that a “technical investigation would be undertaken by a Square team led by Jesse Dorogusker, Square’s hardware lead. If successful, this initiative would be another of Square’s bitcoin focused projects which includes a Bitcoin hardware wallet.


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Financial Leaders from G7 Release Guidelines for Central Bank Digital Currency



Source: World Atlas

At a meeting that was held in Washington, yesterday, October 13, G7 leaders discussed central bank digital currency and endorsed 13 public policy principles with regards to their implementation. The financial leaders from G7 agreed that CBDCs would complement cash and should not be detrimental to the monetary system. The G7 leaders have been discussing CBDCs this week concluding that they should do no harm and meet rigorous standards.

It should be noted that G7 includes finance leaders in advanced economic nations comprising of Canada, France, Germany, Italy, Japan, the U.S and the U.K. the G7 leaders make it mandatory that any newly launched CBDC should not harm the central bank’s ability to perform its duty of maintaining financial stability. In a joint statement by the G7 finance ministers and central bankers, they said that, 

“Strong international coordination and cooperation on these issues help to ensure that public and private sector innovation will deliver domestic and cross-border benefits while being safe for users and the wider financial system.” 

The joint statement further states that CBDCs are complements to cash and could serve as a liquid or safe settlement assets with an added advantage of anchoring existing payment systems. CBDCs issuance should be entrenched in a long-standing public commitment to transparency, rule of law, and sound economic governance. The statement added at CBDCs must be so efficient that they are fully interoperable on a cross-border basis. 

The G7 leaders agreed that they had a duty to minimize the incidence of ‘harmful spillovers to the international monetary and financial system” 

The G7 statement reiterated a similar statement earlier made by G20 that no global stablecoin project should begin operation until such a token has addressed legal, regulatory and oversight requirements. 

Countries like China and Nigeria are ahead of the pack with regards to the adoption of digital Yuan and Naira respectively. China’s crackdown on cryptocurrency may be a step forward for the country’s plan to promote its digital Yuan. Nigeria, on the other hand, postponed the launch of its eNaira in deference to the 61st anniversary of Nigerian independence on Oct 1. 

However, countries like the US and the UK are dragging their foot with regards to the introduction of CBDCs to their financial system. There are insinuations that America is in danger of being left behind technologically and financially if it doesn’t get serious with the implementation of CBDC in its financial system.

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