CBDC is Not a Priority for the Kenya Central Bank
- The Central Bank of Kenya said that the creation of a CBDC is not a priority for it, adding that a digital shilling is not a priority.
- It said that it would “continue to monitor developments” and take a “measured approach” prior to issuing a CBDC.
- The Central Bank of Kenya stated that the “allure of CBDCs is fading” following the recent decline in the price of crypto.
- It has collaborated with “other central banks that have developed proof of concepts for CBDCs, to benefit from their experience.”
Countries around the globe are currently testing the need for central bank digital currencies, and many have even completed their pilot phase, like China’s digital yuan. However, some other countries, like Kenya, a country in East Africa, might have other goals in mind before officially launching a central bank-backed blockchain-based currency. As per a recent statement from officials, the creation of a CBDC is not a priority for the Central Bank of Kenya, which therefore, stated that it would take a “measured approach” before debuting a digital shilling.
As per the press release, also shared via social media platform Twitter on June 2, in February, the Central Bank of Kenya issued a Discussion Paper on the potential applications of the circulation of a CBDC and also sought views from the general public on the same. The central bank of the country stated that the discussion paper’s “objective was to inform policy decisions and public acceptance regarding the innovation.”
The Central Bank of Kenya said that it had received over 100 responses from members of the public, commercial banks, tech firms, and other entities that participated in the discussion from over nine countries to figure out the use cases of a CBDC. These countries include Kenya, South Africa, the United States of America, the United Kingdom, the Netherlands, Germany, Switzerland, Sweden, and Japan.
While the discussions varied from potential use cases to the risks of using a central bank digital currency, the bank stated that it would “continue to monitor developments” in the blockchain industry and take a “measure approach” prior to releasing the digital shilling. The bank added that “implementation of a CBDC in Kenya may not be a compelling priority in the short to medium term.”
“Significantly, Kenya’s pain points in payments could potentially continue to be addressed by other innovative solutions around the existing ecosystem. This would be consistent with CBK’s vision for a payments system that is secure, fast, efficient, accessible to and works for Kenyans. Nevertheless, CBK will continue to monitor developments in CBDCs to inform future assessments of the need for CBDC in Kenya,” said the press statement from the CBK.
More importantly, the Central Bank of Kenya stated that the “allure of CBDCs is fading” while adding that those central banks that tried to issue central bank digital currencies earlier were faced with challenges that have “hampered implementation.” As the blockchain-based payment technology would enable cross-border transactions, the authorities want to assess the risks prior to implementing the concept.
The Central Bank of Kenya added that the “recent instability in the global crypto assets market has amplified concerns and the need for a careful review of the innovation and technology risks.”
The central bank added that it has collaborated with “other central banks that have developed proof of concepts for CBDCs, to benefit from their experience.” Additionally, the Central Bank of Kenya is also “working with central banks that have implemented CBDCs to understand if the expected benefits have been realized.”
As reported earlier by Bitnation, Kenya plans to introduce a 3% tax on digital assets for the coming budget year as other sources of funding prove expensive or inaccessible. The tax will be applicable to crypto coin holdings on digital exchanges and wallets and will also be “akin to excise duty charged on bank transactions.”
More importantly, as per a study published last year, Kenya is home to the largest number of crypto holders in Africa, a country that is gradually moving towards cryptocurrencies.