ELECTRONIC CURRENCY (EC)
Electronic Currency (EC) is a legal tender that is issued and controlled by the Apex Bank [in the case of Nigeria, Central Bank of Nigeria (CBN)] in a digital form or format. It has the attributes of physical money though intangible. A N1 held in Digital Currency (EC) has an equal purchasing power as N1 held in tangible money. EC is a direct liability on the CBN and it is available to every Tom, Dick and Harry (Dare, Abu and Amaka).It is for every young, old, MSMEs etc provided there are basic skills on Information and Communication Technology (ICT) usage.
The main purpose of EC is for payment and transaction. It aims to facilitate the velocity of money amongst individuals, businesses and cross border trading. EC would bridge the gulf between the banked and the unbanked as it would work with USD code and promote financial inclusiveness. It can be in form of peer to peer (p2p), Business to Business (b2b) and so on.
WHAT ELECTRONIC CURRENCY (EC) IS NOT
Electronic Currency (EC) uses a similar platform as crypto currency called block chain technology but it is not a cryptocurrency or its variant. A block chain provides a systematic recording of transaction across a network of computers. It is not an investment that could result in a gain or a loss or diminution of asset. Therefore, it does not fulfil the investment motive for holding money. In short, it is not an interest bearing currency. Don’t expect any fluctuation of your held EC in your wallet that is different from the currency in your conventional bank account.
NIGERIA EC DEBUT
The CBN as part of its monetary policy added EC to the country financial sector to join the likes of Bahamas, East Caribbean region to mention but a few countries, and incidentally, the first in Africa. Some of the reasons the governor of CBN alluded to during the launch on the 26th October, 2021 are;
• Promote and facilitate financial inclusiveness,
• Enable direct welfare disbursement to citizens,
• Reduce the costs of processing cash.
ADVANTAGES
Reduction of illicit activity such as drug, arm etc
It makes tracking easy
Ensure transparency through feasibility
A threat to foreign currency
May impact on inflationary pressure
Reduction in round tripping
It enhances diaspora remittances.
RISK
It could crowd out investible fund from the conventional fiat currency held
in bank accounts if large numbers were to move money to their e-wallets.
Cyber attack through hacking, phishing and other cyber threats.
Lax in regulatory framework. Good as the EC looks; poor regulation can
mar its potentials.
CONCLUSIONS
One of the key challenges with crypto currency is the lack of regulation. It is laissez-faire in nature and form and it is subject to abuse. Financial system is built on accountability and trust which the CBN through digital currency is attempting to restore into the space. In order to achieve this, the CBN must have a team of staff that are well resourced and positioned especially in ICT to deliver, monitor and enrich the system.
It is my considered view that CBN must partner with the end users and other regulatory bodies by providing a platform for reporting abuses as well as a confidential and robust whistle blow policy.
MOI, Ph.D