Kenya Central Bank Takes Ambivalent Stance on Digital Currency

The Central Bank of Kenya said “pain points” in the country’s payments systems can be addressed by innovations structured around the existing ecosystem and that a central bank digital currency (CBDC) “may not be a compelling priority.”

In a statement published on Twitter on Friday, the central bank said it received more than 100 comments on a consultation it started in February. Respondents came from nine countries and included representatives from commercial banks and institutions.

Respondents highlighted benefits of a CBDC such as increased efficiency, and also risks including high implementation costs and financial exclusion, it said.

The central bank said countries that had issued a CBDC, which is a digital token issued by a central bank, have faced issues “that have hampered implementation” and that the recent instability in the crypto market has amplified concerns. Nigeria, for example, has faced issues with adoption while the Bahamas central bank said in May it was working on a strategy to improve CBDC adoption, three years after its launch.

Billions were wiped out of the crypto market last year during the so-called crypto winter and the market turbulence was exacerbated by the collapse of stablecoin issuer Terra and crypto exchange FTX.

“The allure of the CBDC is fading,” the Central Bank of Kenya said in its press statement. “The bank will continue to monitor developments in CBDCs to inform future assessments.”