The Central Bank of Kenya (CBK) said that a possible CBDC could have a positive impact on the local financial system. However, the institution presented a discussion document to find out the opinion of the general public on the subject.

Seeking society’s opinion

According to the CBK, the launch of a central bank digital currency could flatten the multi-layered correspondent banking structure and improve cross-border payments. The latter will be more efficient and less expensive, the organization added.

Despite its favorable stance on the monetary product, the central bank published a discussion paper to examine whether locals support it. They will be able to analyze both the threats and the opportunities that a CBDC could generate. Those who wish to participate have until May 20, 2022 to submit their comments.

Kenya’s central bank added that a CBDC could potentially shield society from “the risk of new forms of private money by providing more secure and reliable payment services than new forms of privately issued money-like instruments such as coins.” stable”. On the other hand, the institution did not rule out the possibility that a financial product of this type presents an opportunity for cyberattacks:

“The ‘unknowns’ would affect the central functions of central banks of monetary policy, financial stability and supervision of payment systems.”

Kenya has joined a number of countries that are already actively exploring central bank digital currencies. These include China, India, South Korea, Malaysia, and more.

Earlier this week, another African nation, Zambia, announced that it will complete its CBDC investigation by the end of 2021. This seems like a natural move as local authorities have previously criticized private cryptocurrencies.

Could CBDCs be the better option than cryptocurrencies?

A few days ago, the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, suggested that a “prudently” designed CBDC could be a “safer” monetary product than cryptocurrencies. She described bitcoin and altcoins as “unbacked” and volatile, while a digital form of a national currency could be completely controlled by institutions or governments.

However, it is worth noting that the Central Bank of Kenya has previously shown some affection towards BTC as well. Towards the end of 2020, the institution blamed controversial IMF policies for the weakening of the shilling.

Therefore, Central Bank Governor Patrick Njoroge opined that the adoption of the main cryptocurrency could protect Kenya from foreign exchange losses and could fix some of the local financial turmoil:

“Our decision to switch to Bitcoin is both tactical and logical. Our currency has always been the punching bag for the IMF, which always claims that the Kenyan shilling is overvalued.

This has led to too much pressure on the Kenyan shilling, and this has a negative effect on the economy. We are losing too much simply because someone at the IMF woke up on the wrong side of the bed. Bitcoin will put an end to this.”

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