ICT4SDG | SDG1 | SDG10
January 12, 2017

How digital fiat currency issued by Central Banks will drive financial inclusion

By Dr. David Wen

Currency as a store of value, unit of account, and medium of exchange has accompanied society since the dawn of civilization and commerce. Fiat currency issued by the central bank under the law and constitution of each country added trust and governance as well as security to this simple yet powerful instrument.

Fiat currency has also played an important role in financial inclusion by providing equal access to this infrastructure for people of all walks of life and socio-economic backgrounds. As society has evolved, the form of currency has changed from shells and precious metals to minted coins and paper currency.

The societal changes introduced by the rise of the Internet and mobile technology have led to fundamental changes in the way we lead our daily lives, however, the account-based electronic and mobile payment systems used today are yet to realize the full potential of a truly digital version of fiat currency.

Mobile money from different vendors is not interoperable to the extent that cash is. It presents challenges to effective regulation and consumer protection as the main businesses of these private mobile-money providers are not secured against insolvency of funds deposited in these systems as a true store of value. Private crypto and virtual currencies have an exchange rate with fiat currency, and as such it fails as a unit of account.

The route to internationally accepted digital fiat currency

Challenges to interoperability, trust and regulation are even more acute in the developing countries where as much as 80% of the population do not benefit from the financial infrastructure provided by traditional banking systems.

The ITU-T Focus Group on Digital Financial Services has been the most recent effort to tackle challenges to broader financial inclusion, looking in particular at how digital tools could bring basic financial services to the estimated 2 billion people still without access to a bank account. This group delivered a set of policy recommendations with potential to boost growth and innovation in the Digital Financial Service ecosystem, the interoperability of payment systems, and consumer protection and security.

A recent comprehensive report produced by the India Ministry of Finance in December 2016, the Watal report, highlights three principles as being essential to an effective digital fiat currency (DFC) solution: (1) Ownership neutrality, (2) Technology neutrality, and (3) Infrastructure neutrality. These are very important problems and constraints that a true DFC solution must solve and meet.

ITU will play a critical role in driving the international standardization of the technical frameworks necessary to a true DFC.

eCurrency has been an active participant in the ITU-T Focus Group on Digital Financial Services in addition to providing inputs for the Watal report. Our DFC solution is a product built on the three key principles identified by the Watal report and is intended to address the main challenges faced by today’s Digital Financial Services.

eCurrency: Demonstrating the three key principles of a true DFC solution

eCurrency was established over five years ago with the goal of providing a solution for a Central Bank-issued DFC that can be distributed by all financial institutions, proving accessible to all consumers and merchants as a secure and interoperable payment instrument.


We have worked with over 32 central banks around the world, run pilots with large mobile-wallet providers, and developed the necessary infrastructure service to enable seamless interoperability among completely different types of payment systems – including debit card, mobile, payment network, and banking systems – through a set of eCurrency API and services.

Most recently, the first commercial deployment of DFC that involves the banking system as the issuer and mobile-wallet provider as the distributor has been successfully deployed in Senegal.

The distinguishing feature of the eCurrency solution is that it can be considered a regulatory technology for the payment ecosystem that allows the Central Bank to issue secure hardware-protected cryptographic objects (DFC Instrument) independent of payment or ledger systems.

Each payment or ledger system becomes part of the DFC ecosystem via integration through the eCurrency Open API and a one-time initialization process. Once enabled, all customers and merchants served by the underlying payment or ledger system can reach any customer and merchant in this ecosystem.

The properties of fiat currency ensure instantaneous settlement between any two parties, regardless of which payment system or ledger system they deal with. The laws governing fiat currency protect consumers and merchants using DFC, with Central Banks empowered to operate DFC within existing legal and regulatory frameworks.

eCurrency is ownership neutral as it allows any financial institutions to compete in the distribution of DFC just like they do today with paper currency. It is also technology and infrastructure neutral by allowing all existing financial institutions and mobile-money providers to join the Digital Financial Service ecosystem on a level playing field.

For more information on the work of eCurrency, visit the web site; look at eCurrency CEO Jonathan Dharmapalan’s AFI presentation (video) and a technical presentation given to ANSI X.9 (US Core Banking standard body); and follow our news at eCurrency news.

Dr. David Wen
David is the co-founder and Chief Scientist of eCurrency. He brings over 20 years of experience and technological thought leadership in the area of digital currency, distributed ledger, identity management, security protocol design, cryptography, key management, and electronic payment systems. He was the security architect behind the design and implementation of the U.S. Department of Defense’s Common Access Smart Card, and went on to become the Chief Scientist of SAIC helping the entire US government to adopt the Personal Identity Verification (PIV) program. He has 11 U.S. and EU patents in the area of security protocol and cryptography.
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