According to a recent report, the Kenyan central bank has downplayed the need for a central bank digital currency (CBDC). The bank stated that the nation doesn’t need a CBDC in the short-medium term and rather recommended a survey on the adoption of digital currencies in the country.
In the “Bank Supervision Annual Report 2022,” recently published by the Central Bank of Kenya (CBK), the bank discussed digital shilling, digital currency adoption, mobile money, and more.
The central bank in its report highlighted the increasing adoption of digital currencies in the nation in recent years and cited the following reasons behind it. The CBK sees increasing adoption due to the users seeking faster payments, low transaction costs, decentralization of finance, and anonymity.
Simultaneously, others have flocked to digital assets to bet on their volatility. However, the bank acknowledges the risks involved and states that digital currencies come with the risk of enabling the flow of illicit finance and cyber risks.
Reportedly, the CBK is observing its peers globally before taking a stand on Bitcoin. Without committing to regulating the sector, the bank stated that its approach would be guided by three principles: people-centricity, country context, and a balance between risks and opportunities.
In recent times, several studies have ranked Kenya to be at the forefront of digital currency adoption. It held the top rank globally in 2020 and 2021 for peer-to-peer volume and, last year, was ranked 19th for adoption globally. However, according to the central bank, none of these studies are conclusive. It said:
So far, there has been no survey done to establish the extent of crypto asset usage in the country. Accordingly, Kenya will benefit from a survey on crypto assets.
Combined with a consultative paper on digital currency, such a study will allow the bank and regulators to formulate informed policies for the sector. Further, the central bank in its report dismissed the need for digital shilling shortly.
Presently, Kenya’s pain points in payments can potentially be solved by strengthening innovations around the existing payment ecosystem. Accordingly, implementation of a CBDC may not be a priority in Kenya in the short-medium term.
Notably, CBK Governor Patrick Njuguna has previously dismissed Kenya’s need for a CBDC even as Tanzania, South Africa, Ghana, and other African countries explore digital versions of their national currencies. However, given their economic standings wherein most of the African nations are struggling with hyperinflation and currency devaluation, the case of Nigeria stands as a warning.
Despite all efforts to foster the adoption of Nigerian CBDC the government, the citizens continued to choose to rely on cryptocurrencies. The scene kept getting worse and also triggered violence in the country. Simultaneously, the African continent is making moves to become a prominent player in the crypto scene, with Nigeria, Kenya, and the Central African Republic embracing crypto, to the extent that CAR declared Bitcoin as a legal tender.