The Bank of Ghana (BoG) has finalised a proof-of-concept to explore using digital credentials for international trade and cross-border payments with central bank digital currencies (CBDCs).
This progress was part of Project DESFT (Digital Economy Semi-Fungible Token), a collaborative initiative by the BoG and the private sector, launched in June 2023. The project aimed to demonstrate the use of digital credentials for international trade and cross-border payments.
In collaboration with the Monetary Authority of Singapore (MAS), the project concentrated on cross-border trade between Ghana and Singapore. Project DESFT utilised the UN-developed blockchain-based Universal Trusted Credential (UTC), the Singaporean Dollar stablecoin, the Ghanaian CBDC (eCedi), and purpose-bound money (PBM).
Dr Maxwell Opoku-Afari, First Deputy Governor of the BoG, said, “Project DESFT is aimed at supporting SMEs in Africa to engage in international trade by removing significant obstacles they face, such as establishing trust with overseas trade partners and obtaining support in cross-border payments and supply chain finance. We believe that the new generation of financial technology offers innovative approaches to these challenges.
“After nearly a year and two phases of development, we have crafted a reliable information exchange solution founded on UTC standards and Semi-fungible Token technology. Furthermore, we have rigorously tested a cross-border payment solution built upon the principles of PBM and conducted real trade experiments, which fully align with our predetermined objectives.”
CBDCs offer a range of benefits and use cases for CBDCs. These include faster processing times, reduced transaction costs, enhanced security, and increased financial inclusion.
However, some leaders around the world have voiced concerns over the technology. Notably, US Presidential candidate Donald Trump often cites its ability to easily trace transactions, which raises privacy concerns regarding the government’s influence over the digital currency.
Looking ahead, the next phase of Project DESFT aims to expand on its current successes by concentrating on highly automated digital credential processes, enabling programmable payments in various digital currencies, and providing support for supply chain finance.
Sopnendu Mohanty, MAS Chief FinTech Officer, commented: “I congratulate the Bank of Ghana and participating FinTechs from Singapore, Ghana, and Europe for completing the trade experiments under Project DESFT.
“The project offers MSMEs in developing regions increased access to financial services, unlocking international trade opportunities. I look forward to seeing more applications of such solutions soon to foster closer Singaporeto-Ghana and ultimately Africa-to-Asia collaboration.”
CBDCs have been used for cross-border transactions in other parts of the world. Last year, Monoova successfully completed the first cross-border settlement using an Australian CBDC dollar.