In both Nigeria and Singapore, everything seems to be set for the launch of a CBDC.
The Central Bank of Nigeria (CBN), through the words of Rakiya Mohammed, Director of Information Technology, has announced that it may issue its Central Bank Digital Currency (CBDC) as early as October this year.
According to news reported by local news outlet Nairametrics, the CBN recently sent a presentation to Nigerian banks on the eNaira project, revealing more details on its design, operational module and preliminary guidelines.
The same document also shares details on the tasks assigned to each of the parties participating in the eNaira programme.
The report states that eNaira will be legal tender for the entire country, in hopes of reducing incentives for those wishing to use unregulated cryptocurrencies, will offer parity of value and will, as such, not be an interest-bearing currency like its other crypto sisters.
The CBN paper also contains data and estimates relevant to international money transfer operators (IMTOs), and outlines plans to integrate the new digital currency with central bank forex control policies.
It will work alongside the country’s fiat currency with the CBN responsible for issuing, distributing and exchanging the digital currency.
The authorized financial institution will be tasked to initiate security checks on all personally identifiable data and information, the so-called Know Your Customer (KYC) process, in order to detect illegal intentions by users and ensure AML compliance.
Different transaction limits have been devised by the Central Bank of Nigeria for exchanges with eNaira, depending on the subject: for example, citizens who do not have a bank account will have a daily transaction limit of 50,000 eNaira, corresponding to approximately $120.
As for the blockchain technology chosen to manage the currency’s transactions, the CBN opted for Hyperledger Fabric, an open source project of the Linux Foundation designed as a basis for the development of blockchain-based products.
Nigeria and cryptocurrencies
Like many developing countries, Nigeria faces the problem of financial inclusion. Currently, its financial inclusion rate is only 60%.
As a digital form of money, a CBDC would help make it more accessible and allow the population to participate in the growing e-commerce economy. It will be the responsibility of Nigerian banks to promote and market centrally issued digital currency as an alternative to cash to existing and potential customers.
Nigeria has one of the youngest populations in the world and this factor is certainly conducive to the appetite for digital finance. According to the Paxful platform, Nigeria is second only to the US in terms of bitcoin trading: the dollar volume of cryptocurrencies received by users in Nigeria in May was $2.4 billion.
This initiative, which focuses on the development and implementation of digital assets, makes Nigeria the second West African nation in 2021 to declare a launch date for the pilot phase of its Central Bank Digital Currency. Leading the way was the Bank of Ghana, which announced that it will begin testing its Digital Cedi by September.
CBDCs in Singapore
In the rest of the world, however, we are witnessing a major event that positively marks the central bank-related digital currency sector: the “Global CBDC Challenge” organised by the Monetary Authority of Singapore, which selected 15 participating companies to help build an in-house retail digital currency.
The challenge saw the participation of over 300 fintech companies spread across more than 50 countries.
The finalist companies chosen by the MAS are six companies from Singapore, four from the US, one from Germany, one from Switzerland, French marketing company Criteo, one from Australia and one from Barbados.
The finalists will have access to the APIX Digital Currency Sandbox for rapid prototyping of digital currency solutions and will have the opportunity to present their CBDC solutions at the Singapore FinTech Festival, which is scheduled from 8 November to 12 November 2021.
This initiative to build a retail CBDC for Singapore will end with a cash prize of 50,000 Singaporean dollars, equivalent to approximately $37,000.