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Kenya Explains Importance Of Digital Currency, Ready To Launch CBDC

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The Central Bank of Kenya (CBK) has issued a discussion paper on the adoption of digital currency in the country ahead of preparation to fully implement CBDC in the country.

The paper dated February 2022 spells out the opportunities, risks and applicability of the digital currency in the country.

The development is a call by Kenya’s central bank to the public to share their views on the possibility of adopting a digital currency before May 20th.

What CBK is saying about CBDC adoption
While CBDCs are receiving attention more than ever across the globe in recent times, CBK said its interest in digital currency is primarily influenced by CBK’s philosophy towards innovation that seeks to maximise opportunities while minimising risks.

Inferring from how mobile money in Kenya is helping to address the challenge of individuals transferring money from urban to rural area, the apex bank said the focus of the assessment of CBDC innovation must be on functionality and the problem it resolves for the people rather than the underlying technology.

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It stated, “Whilst CBDC offers opportunities to reduce costs associated with digital payments, it also comes with risks particularly related to cybersecurity and unknowns on how it would impact central banks’ core functions of monetary policy, financial stability and payment systems oversight. Further, in the case of Kenya where electronic money has taken root, the proposed value solution offered by CBDC seems to be already met.”

The bank also noted that it sees a key opportunity value in the use of CBDC to facilitating cross-border transactions. It noted, “cross-border payments have technologically evolved more slowly than domestic transactions. Currently, international currency transactions are expensive and individuals are charged high fees to move funds from one country to another, especially when it involves currency conversions.

“CBDC could positively disrupt the cross-border market by making it more efficient and less costly. However, there are also the aforementioned risks that CBDC would introduce. We would therefore need to explore how to mitigate them in view of the benefits. This is an area that CBK is closely monitoring and exploring in collaboration with other central banks.”

Hammed Tajudeen is the editor in-chief of Blaze News, holds Higher National Diploma(HND) in Mass Communication, graduated from Osun State Polytechnic, Iree.

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