Kenya Ponders on A Potential Creation of CBDC in the Country

The Central Bank of Kenya (CBK) has reportedly issued a discussion that will assess the applicability of a central bank digital currency (CBDC) in the country, and comments from the public on the technology is also allowed and appreciated. This new move revealed that the country has been considering the adoption of the technology for a while but clarification on the impact of having a CBDC in the country with a real-time payment system is needed.

Co-Pierre Georg, a professor at the University of Cape Town, said to the media: “Given the dominance of M-Pesa in the country, I think the key question is: What can a CBDC do that M-Pesa cannot?”

Being one of the pioneers in mobile money with their M-Pesa wallet, Kenya is known to have deep pockets in the digital money market, as it has 68.03 million mobile money accounts as of December 2021 with most of them coming from M-Pesa, which is one of the payment methods of best au online casino due to its Kenyan users.

On February 10, a paper, which summarized the evolution of payments in Kenya and globally, was released and it talked about the new digital payment methods like e-money, stablecoins, cryptocurrency and CBDCs.

With the world’s acceptance of digital payments, cryptocurrencies, and stablecoins, central banks across the world have also been steering towards the motion which is adopting CBDCs.

For Africa, this technology could go a long way in reducing transaction costs in the remittance market. And many Africans are delving into cryptocurrencies as an escape from high transfer fees.

However, this doesn’t stop questions from being raised about the effectiveness, accessibility, and privacy of adopting CBDCs.

CBDC is also a digital token, but when compared to cryptocurrencies, which are stored on a decentralized blockchain network, the difference appears as CBDCs are stored on a more centralized network.

With Kenya known to be a world leader in mobile money, the question regarding the addition of CBDCs is an important one that needs to be asked.

Kenya’s central bank claims that a CBDC in the country will not be focused on improving access to financial services after considering the high penetration the country has regarding mobile money. The CBDC aims to be targeted at reducing cost for transactions, payment interoperability between merchants and agents, and enhancing efficiency speed of cross-border payments like games on real money online casino.

The opportunities the CBK spotted in a CBDC is enhanced cross-border payments, in which a CBDC will facilitate enhanced global payments, and promotion of innovation, which will see companies innovate around CBDC-related payment services that could possibly evolve the payment services in the country.

However, one of the risks is a reduction in the use of banks as intermediaries. If a deposit balance is moved from bank deposits to a CBDC, the banks’ ability for creating credit will be reduced.

Kenya is not alone among the African countries exploring the CBDC space, as Zambia had previously announced its aim of creating a CBDC before the end of 2022. Nigeria is the only known African country that has launched a CBDC called e-Naira.