Kenya Will Not Prioritize CBDC Development Right Now

Key Points:

• Kenya has discovered that people are not enthusiastic about the concept of digital money.
• According to the central bank, nations that issued CBDCs experienced implementation challenges.
• The bank said that it would continue to monitor CBDC developments to inform future evaluations.

As governments and central banks around the world investigate central bank digital currencies (CBDCs), Kenya’s central bank said on Friday that while the issuance of a digital currency is not a “compelling priority,” it will continue to monitor developments in the area to help future decisions on issuance.

In February 2022, the Central Bank of Kenya (CBK) released a discussion paper on CBDCs, requesting public for comment on the prospective release of a CBDC in Kenya to assist the CBK in better making policy choices.

“Implementation of a CBDC in Kenya may not be a compelling priority in the short to medium term. Kenya’s pain points in payments could potentially continue to be addressed by other innovative solutions around the existing ecosystem,” said Kenya central bank Governor Dr. Patrick Njoroge.

More than 100 comments were received from people, governmental institutions, commercial banks, Payment Service Providers (PSPs), technology suppliers, academics, the legal community, and foreign development partners, according to the news release releasing the new discussion paper.

Kenya, South Africa, the United States of America, the United Kingdom, the Netherlands, Germany, Switzerland, Sweden, and Japan were among the nations that responded.

Respondents cited positives such as enhanced efficiency as well as dangers such as high implementation costs and financial exclusion.

The central bank said that nations that have issued a CBDC, which is a digital token issued by a central bank, had encountered challenges that delayed adoption, and that recent volatility in the cryptocurrency market had heightened worries. Nigeria, for example, has had difficulties with adoption, while the Bahamas central bank said in May that it was working on a plan to increase CBDC acceptance three years after its inception.

“Further, central banks that were first to roll out CBDCs have recently faced challenges that have hampered implementation. Additionally, 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 bank said.

The central bank went on to propose that additional creative ideas based on the current ecosystem might solve the pain points in Kenya’s payments system. This would be compatible with the CBK’s aim of a payments system that is safe, rapid, efficient, accessible to, and functional for Kenyans. Kenya may rely on current technology to solve any payment issues, according to the report.

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