Davos Flash Reports - GreenHouse Capital

Can digital currency help the African continent?

On 16 January 2023 at Davos, the Centre for Digital Transformation at Imperial College Business School assembled a carefully curated group of participants to discuss how Africa can develop digital currency alternatives to address critical problems of the continent, particularly stablecoins.

Our mission was to identify key issues, share best practices from other domiciles and domains, and outline a desired approach. This workshop was presented in collaboration with GreenHouse Capital. 

Provocation

  • Considerations for which approach to support: CBDC, CeFi Stablecoin (e.g. Tether), DeFi Stablecoin (e.g. An ERC20 Stablecoin)
  • Which currency peg? USD, EUR, GBP or other?
  • How can African governments solve for trust in supporting a stablecoin?

Conclusions

Considerations for which approach to support

  • Manage risk of central banks killing off the banking sector.  
  • Make sure you’re covering all customer needs (not just one segment, such as retail). 
  • Incorporate ESG and marry biodiversity to financial inclusion. 
  • Ensure any solution safeguards citizens, offsetting the significant devaluation going on in Africa right now. 
  • Develop a solution quickly, before we have another reserve currency emerge to replace USD (perhaps RMB). 
  • Create a means of maintaining monetary policy, when many traditional levers would be removed. 
  • How can you restore sovereignty to governments in parallel, while by virtue of creating a private stablecoin you are removing the “status symbol” that national currency represents? 

Which currency peg for a stablecoin?

  • Government would issue its own USD stable coin, and allowing people to redeem it back into local currency, attempting to cut legs out from underneath speculators. 
  • Employ a basket of underlying assets including nature-based such as oxygen – create a biodiversity standard. 
  • Start with USD, then evolve into a basket of currencies based on your trade partners, then into a basket that includes not only currencies, but also natural resources. 

How African governments can solve for trust supporting a stablecoin ?

  • Create a licensing regime for stable coins. 
  • Deploy a stablecoin representing not one single country, but several African countries and eventually all – reducing reliance on any one government – whether Eastern Region (Kenya + Ugana + Tanzania etc), or Big Four (South Africa, Kenya, Nigeria, Egypt). 

Centre of Digital Transformation, Imperial College Business School

Greenhouse Capital