Kenya has become the latest country to begin taking official steps towards creating and launching its Central Bank Digital Currency (CBDC).
This comes after the country’s Central Bank (Central Bank of Kenya) highlighted CBDC’s merits and asked the broad public to express their viewpoint on the financial product.
According to the Central Bank, a potential CBDC could positively impact the local financial system. The bank stated that launching a central bank digital currency could flatten the multi-layered correspondent banking structure and enhance cross-border payments. They said this in a discussion paper to examine if locals are supportive.
Press release: Issuance of Discussion Paper on Central Bank Digital Currency (CBDC) for Public Comments. The Discussion Paper examines the applicability of a potential Central Bank Digital Currency (CBDC) in Kenya. pic.twitter.com/8vdcQNz7cG
— Central Bank of Kenya (@CBKKenya) February 10, 2022
More advantages of CBDC Kenya Central Bank highlighted
Kenya’s central bank added that a CBDC could potentially shield society from “the risk of new forms of private money by providing safer and more trustworthy payment services than new forms of privately issued money-like instruments, such as stablecoins.”
The East African country with the CBDC would significantly reduce the cost of cross-border remittances and integrate private payments with its CBDC.
Kenya’s remittance income rose to $3.7 billion in 2021, up by more than 20% versus 2020. The country participates in two major regional payments systems, but the overall costs of remittances remain high at 8 percent. It reduced from 15 percent experienced ten years ago.
The paper referenced the BIS’s cross-border CBCD payment initiatives overseen, the MBridge Project and Project Dunbar.
Kenya behind Nigeria, Ghana, Zimbabwe, in CBDC creation
Nigeria became the first country in Africa to launch its central bank digital currency (CBDC), dubbed the eNaira, in October last year, while Ghana is said to be at an advanced stage of launching its e-cedi. The Bank of Zambia is also carrying out research on digital currencies. The CBDCs, unlike cryptocurrencies like Bitcoin and Ethereum, are developed by central banks and pegged on countries’ fiat currencies.