Senegal is the second country to introduce a digital currency
Senegal, of which Dakar is the capital, announced last week that it will be issuing its own national digital currency. Senegal is the western most point in Africa, and its currency is actually not the dollar but the Central African Franc or CFA Franc, a currency that is shared by 14 countries in Africa, most of which were former colonies of France. These countries now have a loose monetary union much like the Euro region to the north of them, to whose currency the CFA Franc is pegged. Senegal’s new eCFA digital money will be legal tender and will share this status alongside the CFA paper money currently in circulation.
Unlike bitcoin and other ‘crypto-currencies’ which are as yet largely unregulated and therefore uncontrolled by national governments, using digital money backed by blockchain technology still allows governments and central banks to control the flow of currency, and dictate how much of it is in circulation. The Senegalese eCFA was made possible by a joint effort by Banque Régionale de Marchés and Dublin-based blockchain start-up eCurrency Mint Limited. The currency will be distributed solely by the central bank, and has passed e-money regulations set by the Central Bank of the West African Economic and Monetary Union.
Evidently, Singapore, Sweden, China and many other countries are now considering blockchain-based digital currencies. In the UK, the Royal Mint also announced last week that it would, in partnership with the CME Group of Chicago, be using blockchain technology to allow people to physically trade gold bullion which is physically held in the Mint’s vaults.
Large global banks and financial intermediaries are also now beginning to use blockchain to record and handle transactions: for instance, Barclays announced some time ago that it has worked with a start-up from among its list of service provider partners to provide for a blockchain-based ‘Letter of Credit’ which is the essential backbone of import/export trade. The global credit card giant, Visa, led in India by my dear old friend and college-mate T.R. Ramachandran, is also piloting its adoption in select areas.
In addition, any industry that could use more transparency and security is looking at adopting blockchain technology. According to several articles featured on the Internet, use cases around land records management, disaster relief funding and the control of contaminated food chains are already in advanced pilot stages at companies such as Wal-Mart Stores, Inc. and many sovereign governments across the globe.
In an earlier column, I had explained the working of blockchain technology, and how bitcoin and others have used that underlying technology to create ‘crypto-currencies’ for people to conduct financial transactions with one another without necessarily relying on a banking or other financial intermediary. Blockchain allows financial transactions to be transparent and more secure.
And not just financial transactions—any fixed ‘block’ of finished goods or other commodities that are traded across the world in any supply chain will allow themselves to be easily and seamlessly traded in an almost frictionless and trustable electronic world, since the technology ensures that the original size of the block can’t be tampered with and is instantly updated on every database in the ‘chain’ that passes the original block from one stop to another.
I had also argued that in their attempt to evolve into software product firms, Indian information technology (IT) service providers would be well advised to expend significant energy to produce software products that incorporate blockchain technology for a variety of industries. It appears that they have yet to really capitalize on a technology that is already here and is already being used both by venerable banks and by sovereign countries. Any announcement of a radical blockchain implementation by a bank like Barclays or a country like Senegal always seems to be along with a start-up that is focused on the technology, and not a large IT services firm. Even these start-ups are not India-based, too.
It seems to me that it would be a much better use of time and resources for IT service providers to capitalize on a technology that has already been proven rather than to wave their hands at robotic process automation as it has passed them by—or to make loud pronouncements about small investment bets on start-ups in artificial intelligence, which has made great strides, but is far from the prime time of mainstream adoption into industrial and governmental use. After all, isn’t it the business of IT service providers to integrate technology that is already proven rather than to be venture capitalists taking punts on technology ideas that may never come to fruition?
Senegal is actually the second country to introduce a blockchain-based digital currency. According to news reports, Tunisia has also developed an e-Dinar version that uses similar underlying blockchain technology.
Both of these show that countries in Africa—and other developing nations—hold out the promise to be the test bed of new fintech. One has to wonder whether India, after its recent demonetisation of the vast majority of its currency, can also adopt this technology in the wake of the enormous vacuum in liquidity that has been created as a result. Visa and firms such as Paytm have been beneficiaries of this vacuum as more and more transactions have moved to the mobile Internet space or onto old fashioned debit and credit cards.
So here’s a question to contribute to the already cacophonous ongoing debate: should we have had an official e-Rupee before we de-Rupeed?
Siddharth Pai is a world-renowned technology consultant who has personally led over $20 billion in complex, first-of-a-kind outsourcing transactions.
This article has been amended from its original version.
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