Why CBDC roll out in Kenya might wait longer

CBK to tame mobile rate transactions in fresh reforms

The Central Bank of Kenya (CBK) has raised concerns over rolling out of its proposed digital currency due to lack of access to smartphones by more than half of mobile users in Kenya.

This affects the rolling out Central Bank Digital Currency (CBDC) since Internet access is required.

According to CBK Governor Dr. Patrick Njoroge, there could be a delay in the rollout of the CBDC from the bank due to the smartphone hitch.

In February, the CBK set May 20, 2022 as the last date for public view on rolling out CBDC.

Out of the 59 million cell phone devices, 56 percent are feature phones which implies that it will be hard for half of the subscribers to transact using CBDC.

With an aim to switch about four million 2G and 3G phones to 4G, a sales offer of one million affordable digital sets was made by Safaricom in partnership with Google with customers having to pay only Ksh.20 on a daily basis for over nine months.

“The CBDC will have a minimum viable technology requirement, which may be a sort of fourth-generation (4G) environment. There is an argument to be made that such a development could lead to greater financial exclusion such that some people may fall out of the financial system just because we have adopted a CBDC… This is something we need to be careful about. We may decide therefore that we should wait a little until everyone catches up because at this moment the lower-level technologies are quite prevalent with us,” said the CBK Governor.

However, the Central Bank has not issued a digital currency due to concerns about certain risks involved.

The risks include commercial banks being constrained by movement of deposits into the digital currency and financial exclusion of those without access to technological infrastructure or knowledge.

They also added that a digital currency could curb the effectiveness of monetary policy and increase risks of money laundering.

Some of the advantages that would come about with a digital currency include easing and lowering the cost of cross-border payments with other jurisdictions that design similar currencies.

It is also a safe alternative to the existing, unregulated digital currencies such as Bitcoin.

“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,” said the CBK.

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