The Central Bank of Kenya has acknowledged the “pain points” in the country’s payment systems and proposed innovative solutions that work within the existing ecosystem, stating that a central bank digital currency (CBDC) may not be a top priority.
In a recent statement shared on Twitter, the bank revealed that it had received over 100 comments during a consultation process that started in February.
Respondents, including representatives from commercial banks and institutions across nine countries, highlighted both the advantages of a CBDC, such as increased efficiency, and the risks, including high implementation costs and potential financial exclusion.
Citing the challenges faced by countries that have already introduced a CBDC, the central bank expressed concerns about the complications that have hindered implementation.
Moreover, the recent instability in the cryptocurrency market has amplified these concerns. For example, Nigeria has struggled with adoption issues, while the Bahamas central bank announced its plans to improve CBDC adoption three years after its initial launch.
Last year’s “crypto winter” resulted in significant losses within the cryptocurrency market, which were further exacerbated by the collapse of stablecoin issuer Terra and crypto exchange FTX.
Consequently, the Central Bank of Kenya stated that the allure of CBDCs is diminishing. However, the bank emphasized that it will closely monitor CBDC developments to inform future assessments.
In summary, the Central Bank of Kenya recognizes the challenges in the payment systems and suggests innovative solutions within the existing framework.
While acknowledging the potential benefits of a CBDC, the bank downplays its urgency, citing issues faced by other countries and the recent instability in the cryptocurrency market.
The Central Bank of Kenya will continue to keep a close eye on CBDC developments to guide its future decisions.