Towards Afkoin: a distributed ledger technology-based quantum resistant central bank digital currency for the economic community of west African states

Abstract

Many central banks across the world have begun research and experimentation into the issuance of distributed ledger technology (DLT)-based central bank digital currencies (CBDCs). In general, the goal of such research has been to explore the potential of DLT to improve the security, resiliency and efficiency of financial market infrastructures. We leverage best practice approaches from relevant CBDC experiments with completed proof-of-concept prototypes to propose and initiate the development a DLT-based CBDC as a candidate solution for the Economic Community of West African States (ECOWAS) single currency program. ECOWAS is a fifteen member State regional economic community in West Africa established in May 1975 through the Lagos Treaty. In July 1993, ECOWAS member States ratified a revised ECOWAS Treaty in Cotonou, Benin. The Cotonou Treaty proposed to create an economic and monetary union among ECOWAS member States with the goal of issuing a single currency in the ECOWAS sub-region. In April 2000, ECOWAS member States ratified a legal statute known as the Accra Declaration to begin processes for the issuance of an ECOWAS single currency called the ECO by the year 2003. To date, ECOWAS has been unable to issue the ECO single currency. In this research, we propose and initiate the development Afkoin, a DLT-based quantum resistant CBDC as a candidate solution for the ECOWAS single currency program. We present preliminary design considerations and characteristics of our proposed Afkoin CBDC and develop a technical requirement specification to guide the development of the Afkoin CBDC prototype on the Hyperledger Fabric permissioned DLT platform. The Afkoin CBDC proposed in this research is designed as a wholesale CBDC for domestic interbank transaction settlement among Afkoin ecosystem participants. The Afkoin CBDC ecosystem participants include an imaginary West African Central Bank, a virtual Bank of Ghana as a representative ECOWAS National Central Bank, and virtual Payment Service Providers such as commercial banks that are participants in Ghana’s domestic wholesale payment settlement system. The Afkoin CBDC platform is designed with capabilities for User Management, Wallet Creation, Afkoin Creation, Funds Transfer, Pledge, and Redeem of afkoin tokens. Additionally, capabilities for Balance Enquiry and Versioning of the underlying distributed transaction ledger are accounted for in the design of the Afkoin CBDC prototype. Afkoin will represent a claim on the assets of ECOWAS member States if and when it is adopted by ECOWAS member States. Afkoin will thus perform the three functions of money namely, a unit of account, a medium of exchange, and a store of value

and will serve as legal tender for transactions between ECOWAS member States. Additionally, Afkoin will serve as legal tender for transactions between ECOWAS member States and non-member States.