Senegal may become the first country to release a cryptocurrency based on its national currency.
Earlier this month, Senegal introduced eCFA, a digital currency currently in development in collaboration with Banque Regionale de Marches (BRM) and eCurrency Mint Limited. BRM bank, a Senegal-based financial institution specializing in capital markets and the implementation of tailor-made banking solutions, is leading both the development and integration of the digital currency, which the Senegal government states would serve as a legal tender.
Similar to the vision of Norway’s largest bank DNB, Senegal is attempting to secure a significant market share of Africa’s severely underbanked and underserved populations, which are struggling to find access to reliable and cost-efficient financial platforms and networks to settle cross-border transactions.
Interestingly, the development and launch of eCFA is overseen by the West African Economic and Monetary Union (WAEMU), which suggests that once ready for commercial roll-out, eCFA will be made available for other African countries including Benin, Burkina Faso, Cote d’Ivoire, Niger, Togo and more.
Criticisms and future plans
Upon the first announcement of plans to develop eCFA, BRM bank as well as the Senegal government received criticisms from cryptography experts and analysts due to eCFA’s dependence on a centralized banking system. It has been said that if eCFA is based on its national currency, it defeats the purpose of implementing a digital currency.
In spite of these criticisms, BRM bank CEO Alioune Camara, stated earlier this month that it will assist the Senegal government in creating a system which can facilitate interoperability between all financial applications, platforms and networks within the region.
“An eCFA backed by our banking system and the central bank is the safest and most secure way to enable the digital economy. We can now facilitate full interoperability between all e-money payment systems. This is a great leap forward for Africa.”
Ambiguity in Blockchain specifications
However, BRM and eCurrency Mint Limited have yet to release any technical information and background on their Blockchain-based digital currency. In fact, it is still unknown whether the currency will be based on a permissioned ledger or a decentralized Blockchain network. If the latter, the bank will struggle with existing financial regulations.
If the bank opts for a permissioned ledger, various security consequences will lead to issues with the deployment process, which may turn out increasingly inefficient for both the bank and its future users.
It is also important to note that the R3 consortium, which has spent over two years in the development of permissioned ledgers, has ultimately failed to complete their development phase, which has resulted in multi-billion dollar banks leaving the consortium.