Kenya doesn’t need a central bank digital currency (CBDC) in the short-medium term, the country’s central bank has stated. In a recent report, the bank also recommended a survey on the adoption of digital currencies in the country.
In its “Bank Supervision Annual Report 2022,” published this week, the Central Bank of Kenya (CBK) discussed digital shilling, digital currency adoption, mobile money, and more.
The Bank Supervision Annual Report for 2022 can be downloaded at https://t.co/ZUQmy9xmHz pic.twitter.com/a6w1Tq4i3y
— Central Bank of Kenya (@CBKKenya) May 15, 2023
Digital currency adoption has soared in recent years as users seek faster payments, low transaction costs, decentralization of finance, and anonymity, CBK noted. Others have flocked to digital assets to bet on their volatility. However, the bank noted that digital currencies come with the risk of enabling the flow of illicit finance and cyber risks.
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.
Several studies have revealed 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 CBK, none of these studies are conclusive.
“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,” it said.
Combined with a consultative paper on digital currency, such a study will allow the bank and regulators to formulate informed policies for the sector. The top bank further dismissed the need for a digital shilling in the near future.
“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.”
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. Nigeria already has the eNaira, but the reception has been underwhelming.
“Let’s not look at CBDCs as the silver bullet for all the problems that we have. On the contrary, deal with the problems directly,” Njuguna said last year.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: Central Bank Digital Currencies and Blockchain: The view from the Swiss National Bank
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