Kenya Explores CBDC by Beginning a Public Dialogue

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The Central Bank of Kenya (CBK) said a potential CBDC could positively impact the local financial system. Nonetheless, the institution introduced a discussion paper to find out what the general public thinks on the matter.

Seeking Society’s Opinion

According to the CBK, launching a central bank digital currency could flatten the multi-layered correspondent banking structure and enhance cross-border payments. The latter will become more efficient and less costly, the organization added.

Despite its favorable stance on such a monetary product, the central bank released a discussion paper to examine if locals are supportive. They will be able to analyze both threats and opportunities, which a CBDC might bring forth. Those willing to participate have until May 20, 2022, to submit their comments.

Kenya’s central bank added that a CBDC could potentially shield society from “the risk of new forms of private money by providing safer and more trustworthy payment services than new forms of privately issued money-like instruments, such as stablecoins.” On the other hand, the institution did not rule out the possibility that such a financial product presents an opportunity for cyberattacks:

“The “unknowns” would impact central banks’ core functions of monetary policy, financial stability, and payment systems oversight.”

Kenya has joined a number of countries that are already actively exploring central bank digital currencies. Those include China, India, South Korea, Malaysia, and more.

Earlier this week, another African nation – Zambia – announced it will complete its CBDC research by the end of 2021. This seems like a natural move since the local authorities criticized private cryptocurrencies previously.

Could CBDCs Be The Better Option Than Crypto?

A few days ago, the Managing Director of the International Monetary Fund (IMF) – Kristalina Georgieva – suggested that a “prudently” designed CBDC could be a “safer” monetary product than cryptocurrencies. She described bitcoin and the altcoins as “unbacked” and volatile, while a digital form of a national currency could be entirely controlled by institutions or governments.

It is worth noting, though, that the Central Bank of Kenya previously displayed some affection towards BTC, too. Towards the end of 2020, the institution blamed the IMF’s controversial policies for the Shilling’s weakening.

Therefore, Central Bank Governor Patrick Njoroge opined that adopting the primary cryptocurrency could shield Kenya from Forex exchange losses and could fix some of the local financial turmoil:

“Our decision to shift to Bitcoin is both tactical and logical. Our currency has always been the punching bag for the IMF, which always claims that the Kenya Shilling is overvalued.

This has led to too much pressure on the Kenyan Shilling, and this has a negative effect on the economy. We are losing too much simply because someone at the IMF woke up on the wrong side of the bed. Bitcoin will put an end to this.”

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