• Sat. May 21st, 2022

Ghana e-cedi: everything you need to know about Ghana’s digital currency Ghana news

The Bank of Ghana has announced that it is launching a new digital currency called E-cedi. The digital coin will operate in an interim sandbox and is hinged on promoting financial inclusion and facilitating trade towards a cash economy. This currency has the potential to change the way society thinks about money.

Businesswoman analyzing financial data on a smartphone with virtual reality technology. Photo: Oscar Wong
Source: Getty Images

What is digital currency? It is a currency that exists exclusively in electronic form. It should not be confused with the electronic money currently used in most banks in Ghana and ATMs. With electronic money, money becomes physical once you withdraw it. However, with digital currency, money never takes physical form.

The Governor of the Bank of Ghana revealed that digital currency is at an advanced stage. However, before money is put into circulation, it has to go through three phases: design, implementation and piloting.

Central bank digital currency

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What is a central bank digital currency? CBDC is the digital form of a bank’s fiat currency. In this system, the bank issues electronic tokens, the value of which is guaranteed by the full faith and credit of the government. This new development will replace the minting of coins or paper notes. The central government will determine the supply of this digital currency.

In addition to this, Ghanaians will be able to use Ghanaian digital currency for international transactions. During the announcement and piloting of the new currency, the governor of the bank announced that there would be coordination between the Bank of Ghana and other central banks around the world.

Cryptocurrency vs digital currency

Is CBDC a type of cryptocurrency? No, a digital currency and a cryptocurrency are two different things. Digital currency refers to the electronic form of fiat money issued by governments, while cryptocurrency is a store of value secured by encryption.

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The digital coin is used for contactless transactions between parties where you can electronically transfer an amount from your bank account to another. Cryptocurrencies such as Bitcoins, Ether, and Dogecoin are privately owned and are created using advanced blockchain technology.

Is the currency volatile?

e-cedi
Stock market financial market and trading graph technology concept. Photo: Busakorn Pongparnit
Source: Getty Images

When a currency is volatile, it means that its value fluctuates frequently. To find out the volatility of a currency, calculate the dispersion of changes in the exchange rate around the average. The larger the number, the higher the volatility.

When you hear about a digital currency, the first question usually asked is whether it is volatile. E-cedi should be less volatile than cryptocurrencies since the state supports it. In the event of market fluctuations, the Central Bank will intervene and find a lasting solution to the market instability.

Cryptocurrencies are generally volatile due to many factors. One of them is the lack of proper central bank regulation. They are also subject to high inflation, large losses and uncertainties about future values. All of these factors make them too unstable to play the role of money.

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The importance of E-cedi?

E-cedi will ensure that more people are included in the Ghanaian economy. These digital currency solutions will ensure that the government includes the unbanked population in the digital economy.

The higher financial inclusion will boost the country’s gross domestic agenda which can be used to educate poorer countries. It will also reduce transaction costs associated with transfers and transactions.

Unlike regular money used, E-cedi is available every hour of every day, which means you can make the payment faster. It will also be available for use by everyone, not just those with smartphones. The Bank for International Settlements also said it can improve liquidity by enabling faster transaction speeds.

Digital currency is the way forward for the global economy when properly regulated. Ghana is one of the first countries on the continent to offer its digital currency, making it a pioneer. It is expected that other countries will follow.

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Yen.com.gh has a comprehensive list of the best investment banks in Ghana. Investment banks in Ghana have created a suitable way for Ghanaians to efficiently use their resources for future earnings.

One of the best things about investing and banking is that you have endless alternatives, and it’s up to you which one offers the best package.

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