The Path Towards CBDC Adoption Requires Careful Attention

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Cbdc Fed Karen
central bank digital currency (CBDC)

Recently, a Chainalysis report found that Ghana is well positioned to increase cryptocurrency adoption to levels seen in Kenya and Nigeria. These countries are ranked 11 and 19 on the Global Crypto Adoption Index. Over the past two years, Ghana’s digital asset trading volume has exploded, growing by 400%. On the heels of that report, Ghana continues to make strides in its central bank digital currency (CBDC) program.

Kwame Oppong, the head of fintech and innovation at the Bank of Ghana, spoke on the country’s movement toward a CBDC in an interview at the Africa Money & DeFi Summit, noting that the government’s priority is to finish testing the CBDC.

“I think in terms of CBDC, our goal is to be able to finish testing it. We’ve seen the results. We’re going to look at the study each and every time in the future. But our real reason for doing it is more financial inclusion,” Oppong said.

Right now, the country has focused testing on being able to use the CBDC without internet connectivity. This was a major failure of CBDC projects outside of Ghana. Ghana is smart to ensure that their technology works for all of the people who would use it, making it user friendly. El Salvador’s Bitcoin gambit, where the country made Bitcoin legal currency, had a botched rollout. Users had an incredibly difficult time utilizing the technology, so it resulted in many citizens spending the free Bitcoin in their account and then ending their trial with digital assets. To Ghana’s credit, it is attempting to work out all the kinks before it goes live across the country.

Oppong also noted that a benefit of a CBDC is the data collected from it. Specifically, he discussed the ability for vendors to collect sales data in a way that allows them to attain loans from banks. This kind of data could very well be beneficial and move the country’s banking system forward, helping small businesses expand with greater access. This kind of data would be based on a business willingly providing their information to financial institutions.

However, there are real concerns about data and financial privacy when discussing any kind of CBDC. For example, when a government has full access to financial information, it does not provide an alternative to fiat currency. Part of the allure of fiat currency is that it provides privacy. It isn’t that governments solely use financial data to administer taxes and eliminate money laundering. More and more, institutions utilize financial data for intelligence purposes. It is critical, in order to preserve financial privacy, that the government moves forward with its CBDC in a way that ensures that privacy continues.

If the government is able to make that guarantee to the citizenry, there is a great deal of potential in the technology. Instant settlements can help merchants, including in reducing costs. In Ghana’s case, the government is still taking a wait-and-see approach to determine if the technology is useful. A slow, thoughtful approach is the best approach, and user experience, combined with financial privacy, is paramount if a CBDC is ever to have long-term viability.

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