NAIROBI (CU)_Over the recent years, several central banks across the globe have launched what are known as central bank digital currencies (CBDC), in a bid to move consumers away from unregulated cryptocurrencies, which promise high returns for high risk. In the African continent, Nigeria became the first country to launch its CBDC, dubbed the eNaira, in October last year. Kenya now appears to be looking at following Abuja’s footsteps, as the Central Bank of Kenya (CBK) recently called on the public to share its views on adopting a digital currency.
The apex bank published a discussion paper on CBDCs, and called for written representations and submissions on the matter, which are to be sent to the CBK by 20 May. A CBDC is when the national currency of a country is launched in electronic form, by the country’s monetary authority, with the support of the government. CBK Governor Patrick Njoroge reportedly remains optimistic about launching a CBDC in Kenya, which will be aimed at facilitating cross-border payments, mitigating risks and facilitating the seamless trace of monetary transactions, while promoting financial stability and create a resilient mode of payment.
Launching a CBDC is Kenya is part of Njoroge’s efforts to embrace technological advancements which may be inevitable in the future. According to the central bank Governor, digital currencies of this form reduce the time needed to complete cross-border payments, while significantly cutting costs. However, he warned of several risks involved, including the possibility of invalidating the effectiveness of monetary policy, constraining commercial banks and increasing the risks of potential money laundering. This is in addition to the technological risks posed by an ultimate legal tender system.
“The balance of risks and benefits of central bank digital currency will vary from one economy to another,” the CBK said in a statement.
