A stablecoin for low-cost cross-border money transfers for sub-Saharan African countries
Nowadays the cross-border transfer of funds is difficult and limited between sub-Saharan African countries and the rest of the world (Europe, North America, and developed Asia). This difficulty can be explained by the following reasons:
The CFA Digital (CFAD) stablecoin comes as a solution to overcome the above-mentioned limitations. This stablecoin is indexed at a one-to-one ratio to the CFA francs. It 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 CFAD stablecoin will also be fixed in terms of EUR, but will fluctuate 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 CFAD will be interoperable across multiple blockchains, including Ethereum, Solana, Avalanche, and Cardano.
The CFAD is not a Central Bank Digital Currency (CBDC), but an ERC20 centralized stablecoin – such as the USDT, and the USDC – that is backed by a fiat EUR, through the corresponding Euro stablecoins (EURC and EURT), kept on a trust account at a regulated crypto exchange with published proof of reserve. ERC20 is the token standard for the Ethereum blockchain, which is highly used for smart contracts. This blockchain is a perfect candidate for building decentralized applications. The Ethereum blockchain has been selected for its popularity, wallet availability, faster speed, and lower transaction costs.
The CFAD stablecoin is indexed at a one-to-one ratio to the fiat CFA francs. However, the CFAD is not backed by the fiat CFA, but by its corresponding amount of fiat EUR held by two well-known companies – Tether Operations Limited, and Circle Internet Financial LLC, which are both regulated by the New York State Department of Financial Institutions.
The CFAD is implicitly a stable Euro, as it is always redeemable to the corresponding amount of fiat EUR.
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 this amount of EUR into CFAD stablecoins, then forward the proceed to Bob, who either exchanges it into fiat CFA francs or use it to purchase goods and services from local merchants. The following are the detailed steps.
Paul, a businessman, leaving in Abidjan (Ivory Coast), wants to import goods in USD, for an equivalent of 1,000,000,000 fiat CFA francs – or for the equivalent in a different local currency – from ABC corporation, located in New York (United States). Against 1,000,000,000 fiat CFA francs, Paul obtains 1,000,000,000 CFAD stablecoins in peer-to-peer transactions or from local merchants. Then Paul, forward this CFAD amount to ABC corporation, which converts it into fiat USD on Washington Financial’s website. The following describes the detailed steps of the transactions.
