The electronic CFA (eCFA) – A stablecoin for low-cost cross-border money transfers for sub-Saharan African countries

The Background

Nowadays the cross-border transfer of funds is difficult and limited between Sub-Saharan African countries and the rest of the developed world (North America, Western Europe, and developed Asia). This difficulty can be explained by the following reasons:

High costs of remittance from the developed world to the sub-Saharan African countries.

Capital controls that limit the transfer of funds from the Sub-Saharan African countries.

Slow and costly cross-border payments within the sub-Saharan African countries.

The non-convertibility of the sub-Saharan African countries’ currencies outside their issuing zones.

The Vision

The eCFA stablecoin comes as a solution to overcome the above-mentioned limitations. This stablecoin is indexed at a one-to-one ratio both CFA francs (the XAF used in Central African Countries, and the XOF used in West African countries). The eCFA is fully collateralized by the corresponding EUR held in deposit at a custodian bank. As both the Central and West African fiat CFA francs are pegged to EUR by the fixed rate of 655. 957 CFA to 1 EUR, the price of the eCFA stablecoin is also fixed in terms of EUR, but fluctuates in terms of other major currencies – such as USD, CAD, GBP, CHF, JPY, and AUD – as the price of these currencies fluctuate in terms of EUR. For fast execution, the eCFA is interoperable across multiple blockchains, including Ethereum, Solana, and XRP Ledger.

The purpose of the eCFA is manyfold:

To facilitate cross-border funds transfers, between developed countries and the Sub-Saharan African countries, removing multiple intermediaries, reducing transaction time and cost, and therefore, providing tremendous cost-savings to the Sub-Saharan African communities around the world.

To eliminate the problem of inconvertibility inherent to Sub-Saharan African countries’ currencies. As the eCFA stablecoin is fully collateralized by the equivalent amount in fiat EUR, it is totally convertible outside the Sub-Saharan African region.

To create a means of exchange within the Sub-Saharan African region, for use cases like lending, investments, and payments for transactions. This also helps to increase the access to financial services and financial inclusion in this region.

To provide the Sub-Saharan African region with a more trusted store of value. Being fully collateralized by the fiat EUR, the eCFA stablecoin has a characteristic that none of the Sub-Saharan African countries currencies has. This helps users hedge against low economic productivity and political instability.

The Purpose of the eCFA Stablecoin

To facilitate cross-border funds transfers, between developed countries and the Sub-Saharan African countries, removing multiple intermediaries, reducing transaction time and cost, and therefore, providing tremendous cost-savings to the Sub-Saharan African communities around the world.

To eliminate the problem of inconvertibility inherent to Sub-Saharan African countries’ currencies. As the eCFA stablecoin is fully collateralized by the equivalent amount in fiat EUR, it is totally convertible outside the Sub-Saharan African region.

To create a means of exchange within the Sub-Saharan African region, for use cases like lending, investments, and payments for transactions. This also helps to increase the access to financial services and financial inclusion in this region.

To provide the Sub-Saharan African region with a more trusted store of value. Being fully collateralized by the fiat EUR, the eCFA stablecoin has a characteristic that none of the sub-Saharan African countries currencies has. This helps users hedge against low economic productivity and political instability.

THE eCFA STABLECOIN IN A NUTSHELL

The eCFA stablecoin is a wrapped stablecoin designed to minimize the price volatility, and it does so by ensuring that every unit of the eCFA token is only created when a corresponding amount of fiat EUR is deposited on a reserve account held by a custodian bank. The issuer of the eCFA stablecoin, a registered trust authority, acts under the US GENUIS Act regulatory framework, have audited KYC/AML (Know Your Customer & Anti-Money Laundering) and compliance programs that meet the US regulators’ standards. This trust authority backs all tokens with fiat EUR collaterals deposited in a custodian bank and publishes quarterly proofs of these collaterals attested by Certified Public Accountants. The eCFA’s users can buy and redeem eCFA tokens on crypto exchanges, on the trust authority website, or through peer-to-peer transactions.

The eCFA is not a Central Bank Digital Currency (CBDC), but an ERC20, XRPL, and SPL (Solana Program Library) centralized stablecoin – such as USDT, USDC, and RLUSD – that is backed by the corresponding fiat EUR, deposited at a custodian bank, with published proof of reserve. ERC20 is the token standard for the Ethereum blockchain, which is highly used for smart contracts. This blockchain has been selected for its popularity, and wallet availability, while XRP Ledger and Solana blockchain have been selected because of their faster speed and lower transaction costs.

BUYING and SELLING the eCFA

Users have several ways of purchasing or redeeming the eCFA

Through crypto exchanges

Dans ce cas, les utilisateurs disposent de diverses options pour échanger des paires de devises impliquant l’e CFA , à savoir EUR/eCFA, USD/eCFA, GBP/eCFA, USDT/eCFA, EURT/eCFA, USDC/eCFA , EURC/eCFA , RLUSD/eCFA, etc.

Through the trust authority website

To acquire eCFA tokens, users should make the payment using their debit cards and provide their wallet public addresses on which they wish to receive the tokens.

For the redemption, users should transfer eCFA tokens to the trust authority, along with the wallet addresses on which they want to receive the equivalent amount in stablecoins, such as USDT or EURT.

Through peer-to-peer transactions

Between two users who want to privately transact with the eCFA. In this case, each user must have a crypto-broker account or must hold a wallet compatible with XRP Ledger, Ethereum blockchain, or Solana blockchain.

ILLUSTRATING USE CASES

Remitence from developed countries
to Sub-Saharan African countries

Alice, a holder of a crypto exchange account who lives in Paris (France), wants to send 1,000 EUR to her brother Bob, living in Dakar (Senegal). From her crypto-exchange account, Alice converts the 1000 EUR into eCFA tokens, then forwards the proceed to Bob, who either exchanges it into fiat CFA francs, or use it to purchase goods and services from local merchants who accept eCFA tokens. The following are the detailed steps.

(1) from her crypto exchange account, in Paris, Alice submits a purchase request for eCFA tokens, equivalent to fiat 1,000 EUR.
(2) The crypto exchange credits Alice’s account with the 655,957 eCFA tokens.
(3) Alice, from her crypto account, sends the 655,957 eCFA tokens to Bob’s wallet.
(4) Bob, in Dakar, either:
a. converts these 655,957 eCFA tokens to 655,957 fiat CFA francs (or to the equivalent in a different local currency) in peer-to-peer transactions with another eCFA’s user.
b. or purchases the equivalent amount of goods from local merchants who accept eCFA.

Cross-border transfer of Funds from Sub-Saharan African countries
to developed countries

Paul, a businessman, leaving in Abidjan (Ivory Coast), wants to import goods in US, for an equivalent of 1,000,000,000 fiat CFA francs from ABC corporation, located in New York (United States). Against 1,000,000,000 fiat CFA francs, Paul obtains 1,000,000,000 eCFA tokens in peer-to-peer transactions, or from local merchants. Then, Paul forward these eCFA tokens to ABC corporation, which converts it into fiat USD on a Crypto Exchange. The following describes the detailed steps of the transactions.

(1) Paul converts his 1,000,000,000 fiat CFA francs into 1,000,000,000 eCFA tokens in peer-to-peer transactions with individual users or local merchants.

(2) Paul sends his 1,000,000,000 eCFA tokens to the ABC corporation’s crypto wallet.

(3) ABC corporation sends these 1,000,000,000 eCFA tokens to a US based crypto exchange.

(4) The crypto exchange converts these 1,000,000,000 eCFA tokens into 1,676,939 USD – as 1,676,939 = 1.1 x (1,000,000,000/655.957), assuming EUR\USD = 1.1) – and sends the proceeds to ABC corporation.

(5) ABC corporation ships the goods to Paul.