Kenya to join list of countries with digital currency
The Central Bank of Kenya (CBK) is introducing Central Bank Digital Currency in Kenya’s market space and has invited the public for comments within the next 120 days on the introduction of the currency.
A discussion paper that was released by CBK on Thursday is set to act as the basis of the debate, putting into consideration the risks that will unfold with the issuance of the currency such as cybersecurity, the effectiveness of the monetary policy.
Other challenges that the CBK has related to the digital currency include the financial instability that will be brought about by the loss of customer deposits in commercial banks and increased rate of money laundering.
Banks rely on customer deposits for lending to both the government and the private sector.
However, according to the CBK, the challenge can be solved if the bank is given enough time to adjust and be flexible.
The benefits that the CDBC will bring will include the reduction of printing costs as well as the charges that come with digital payment.
A study done by the International Monetary Fund (IMF) has shown that replacing cash with digital currencies should be put into consideration by governments. In its study that has mirrored a study done by the Financial Sector Deepening (FSD), they have mentioned the positive impact the currency will have.
In order for the CDBC to work, all countries found in the region will need to participate.
Some of the countries in Africa that have adopted digital currencies include Nigeria with its eNaira and Ghana which is set to release its e-cedi. Other national countries that have adopted digital currencies include Canada, the United States of America, Turkey, China, and India.
Digital currency is, however, different from cryptocurrencies like bitcoin and Ethereum which are privately owned and are not tied to value of any asset like soverign currency, making them volatile and speculative.
They seek to create value through some intrinsic mechanism to ensure scarcity, like mining process, or anonymity.
“CBDC could potentially shield the public 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 stable coins,” CBK said.