Central Bank of Kenya (CBK) Moves to Introduce the Use of Central Bank Digital Currency (CBDC)

The shift from paper to digital currency has been brought about by the rapid change of technology in the world. New digital payment methods and use of electronic money have emerged to facilitate transactions.

Africa has seen increase in the use of cryptocurrencies (such as Bitcoin or Ethereum) and stablecoins. Although the idea for CBDCs came from cryptocurrencies, they are two very different types of digital currencies. Central bank digital currency is a direct liability of the central bank, backed by the foreign reserves. Cryptocurrencies are private sector issued or minted. The key difference between CBDCs and cryptocurrency is centralization.

In a press release dated 10th February, 2022, the Central Bank of Kenya (CBK) invited the public to give their views and comments on a number of issues concerning the use of CBDC in the country. The risks and benefits of CBDC. In a discussion paper published by CBK, CBDC could enhance financial stability and resilience and also cross boarder payments. However, there are concerns over data privacy and the risk of financial exclusion.

Countries in Africa that have adopted the use of CBDC are Nigeria and Zambia. Ghana is set to launch its first CBDC while Morocco, Tunisia and Madagascar are still in the research stages.

The Discussion Paper invites comments from the public to be considered when assessing the potential use case for CBDC in Kenya. Written submissions should be sent to CBK by Friday May 20. The paper is available at; https://centralbank.go.ke/uploads/discussion_papers/CentralBankDigitalCurrency.pdf

CBK is responsible for formulating monetary policy, promoting price stability, issuing currency and other functions conferred by an Act of Parliament.