Blockchain for Banking News

Ghana executes cross border CBDC project with Singapore

bank of ghana Opoku Afari

This week the Bank of Ghana hosted its fintech conference, the 3i Africa Summit, where the Monetary Authority of Singapore (MAS) played a significant role. The two countries have been working on a cross border pilot involving Ghana’s  eCedi central bank digital currency (CBDC) and stablecoins. However, its core focus is to enable SMEs in Ghana to trade with SMEs in Singapore. It uses a combination of verifiable credentials, CBDC and purpose bound money as part of Project DESFT (Digital Economy Semi-Fungible Token).

Maxwell Opoku-Afari, Deputy Governor of the Bank of Ghana, underscored the pivotal role of SMEs in Ghana’s economy. They make up 90% of businesses, 80% of employment and 60% of GDP, a trend mirrored in other African countries. “SMEs are the binding constraints to growth,” he said. “And if we’re able to unlock that constraint, then we will begin to see how growth can be broad-based, inclusive, and shared – to be able to lift everybody up. Using digitalization has become the way to unlock that binding constraint.”

In the first phase, the two countries established what Ghana referred to as a financial trust corridor. This involved creating a whitelist of SMEs at each central bank so the SMEs could work with each other.

Universal Trusted Credentials

The second phase involved using verifiable credentials to enable businesses to provide trusted information to overseas counterparties. The content of the credentials ranges from the business’s basic authentication to its licenses, transaction history and financial credentials. 

The DESFT credentials used the Universal Trusted Credential (UTC) standards launched last year by MAS with the United Nations Development Programme (UNDP) and others.

Purpose Bound Money

Another crucial aspect of this collaboration is the concept of purpose-bound money developed by MAS. In the Ghanaian central bank sandbox, banks provided loans to SMEs. Instead of cash, they disbursed eCedi CBDC embedded in smart contracts that regulate its use. This ensures that the funds are used only for their intended purpose, increasing the likelihood of repayment. The Deputy Governor shared that the rate of non-performing loans in the sandbox is currently close to zero, a testament to the viability of this initiative.

Apart from the CBDC, the Singapore side used the stablecoin xSGD for payments.

The next phase of the project will explore programmable payments across multiple digital currencies and supply chain finance. Rwanda also plans to participate in the initiative.

The project’s name, Digital Economy Semi-Fungible Token, derives from a standard developed for semi-fungible tokens developed by the Solv Foundation, the technology partner in the project.

Meanwhile, late last year, the Bank of Ghana also ran a hackathon with EMTECH for the eCedi, with that particular trial implemented on the Hedera DLT. G+D is the technology provider for the eCedi pilot.

Image Copyright: Bank of Ghana