The Bank of Ghana (Bank of Ghana) in collaboration with Monetary Authority of Singapore (MAS) has completed the first proof of concept (POC) under Project DESFT (Digital Economy Semi-Fungible Token) demonstrating the use of digital credentials for international trade and cross-border payments.
Details
The DESFT project, an initiative of the MoE and the private sector was launched in June 2023. The DESFT solution includes the following:
- Universally Trusted Credentials (UTC) – A digital trusted framework and credential standard that enables the delegation and exchange of licenses, certificates and commercial records. This was earlier developed by the United Nations Development Program (UNDP), with the support of MAS, the World Bank and other global organizations.
- Central Bank Digital Currency (CBDC) – Ghana’s CBDC infrastructure, (eCedi) was designed and developed by G+D, while Fidelity Bank Ghana provided banking services and facilitated eCedi exchange transactions.
- Stablecoin – The Singapore stablecoin issued by StraitsX was used for digital payments based on the concept of Purpose Bound Money (PBM)1.
- Commercial market – a trading marketplace provided local SME platforms, with comprehensive cross-border trading connectivity powered by Proxtera2.
- Escrow arrangement – Ample FinTech’s DESFT solution based on the PBM concept facilitates payment upon successful verification of digital credentials and fulfillment of transactions.
Digging deeper
The first phase of the project involved the design and development of a trusted credentialing system aimed at enhancing the participation of Ghanaian Small, Small and Medium Enterprises (MSMEs) in international trade.
This allows trading partners and financial institutions to effectively verify the authenticity of trade information, thereby reducing frictions and costs for SMEs in developing regions to participate in global trade.
Expanding on this foundation, the second phase of Project DESFT culminated in the successful execution of a cross-border trade between Ghana and Singapore in April 2024 leveraging the DESFT solution and presented at the 3i Africa Summit.
Because this matters
Live trades proved the feasibility of using the proposed domestic Ghana retail CBDC platform, the eCedi in cross-border transactions.
This confirms the proven potential of the eCedi system for future interoperability with various cross-border credential and payment platforms.
The future introduction of the eCedi is poised to significantly enhance Ghana’s dynamic payments ecosystem, fostering inclusive growth and innovation while enhancing consumer experiences.
With its interoperability with the DESFT system and verifiable credentials through UTC, eCedi has the potential to facilitate the participation of Ghanaian SMEs in international trade in a cost-effective manner.
What they say
Dr Maxwell Opoku-Afarithe 1st Deputy Governor of the Bank of Ghana said, “The DESFT project aims to support SMEs in Africa to engage in international trade by removing significant barriers they face, such as building trust with external trading partners and gaining support in cross-border payments and supply chain financing. We believe that the new generation of financial technology offers innovative approaches to these challenges.
After almost a year and two phases of development, we have created a reliable information exchange solution based on UTC standards and Semi-fungible Token technology. In addition, we have rigorously tested a cross-border payment solution based on the principles of Purpose Bound Money (PBM) and conducted real-world trade experiments that are fully aligned with our pre-defined goals.”
Mr Sopnendu MohantyChief FinTech Officer of MAS said, “I congratulate the Bank of Ghana and the participating FinTechs from Singapore, Ghana and Europe for completing the commercial experiments under the DESFT project. The project offers SMEs 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 cooperation between Singapore and Ghana and ultimately Africa to Asia.”
What happens next?
The next phase of Project DESFT will build on its current achievements and focus on highly automated digital credential processes, programmable payments in multiple digital currencies and support for supply chain finance.
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