Bitrabo Editorial
The Central Bank of Kenya (CBK) is open to explore the potential of a central bank digital currency (CBDC). However, considering the waning appeal of CBDCs globally and the availability of alternative payment solutions in the East African nation, the central bank has issued a statement on June 2, specifying that developing a virtual version of the Kenyan Shilling is not their immediate focus.
Kenya: CBDCs Have Its Benefits But Is Not Our Priority
Kenya has expressed interest in the use of blockchain technology and has even investigated the potential of CBDCs. In February 2022, CBK had invited public input on the implementation of a CBDC in Kenya, seeking views from the public that could inform policy and gauge the degree of public acceptance of the innovation.
The CBK reported 16 months later that the feedback highlighted the advantages offered by CBDCs, such as lower transaction costs, increased transparency, and enhanced efficiency. However, even with these positives, the CBDC in Kenya would likely disintermediate banks, lead to financial exclusion, and incur high implementation costs. There would also be risks of possible cyberattacks on the issuing entity since the CBDC will exist digitally and be issued over a public or private network. It is noteworthy that CBDCs differ from privately issued crypto assets such as Bitcoin or Ethereum.
The central bank has acknowledged that other financial institutions, such as the Bank of International Settlement (BIS), the International Monetary Fund (IMF), and other central banks, are conducting research on CBDCs. Furthermore, they have collaborated with other central banks that have already developed proofs-of-concept for CBDCs to benefit from their experience.
The CBK has been cautious, observing that the initial hype around CBDCs is fading, and banks that were early adopters are facing challenges that are impeding implementation. Besides, the instability in the global crypto markets has further worsened the situation.
Fixing Local Problems with Local Solutions?
Due to this history, the CBK has decided to halt the progression of CBDCs but will monitor any advancements in the field. They explained that current options offer alternative payment systems consistent with their objective of providing a “secure, fast, efficient, and accessible” network that works for all Kenyans.
In 2021, the Central Bank of Nigeria (CBN) launched the eNaira, a digital version of the Naira that was meant to complement but not replace cash. The CBN launched the eNaira to increase transparency and accountability while reducing the cost of doing business in the country. Nonetheless, as with all CBDCs, there were concerns about security and privacy implications.
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