The governor of the Central Bank of Kenya Dr Patrick Njoroge said on Friday that the introduction of Central Bank Digital Currencies (CBDCs) could promote innovation, help reduce the cost of transactions while also improving cross border transactions.
A CBDC is an electronic form of central bank money issued and backed by a central bank and can be used by households and businesses to make payments and store value.
Dr Njoroge was speaking at a panel discussion dubbed “Central Bank Digital Currency and Private Digital Payments in Nigeria and Kenya: Challenges and Opportunities for Sub-Saharan Africa” organized by the IMF’s African Department. Dr. Kingsley Obiora, Deputy Governor of the Central Bank of Nigeria also participated in the conversation.
In Kenya, the national access to financial inclusion is at 83 percent, an improvement from 26.7 percent in a decade. According to Kenya’s Central Bank Governor, CBDCs could help accelerate innovation beyond Kenya. However, he warns that the disruption of a digital currency arrangement may lead to follow-on effects that may pose broader risks to financial markets.
According to the Governor, CBDCs will significantly enhance the efficiency of cross-border payments, as long as countries work together. He mentioned that they have been working together with a number of Central Banks in Africa and outside the region such as the Monetary Authority of Singapore on how to work together to roll out the government backed digital currencies.
Njoroge’s Advise to Countries Looking to Roll Out CBDCs
For those countries looking to explore and introduce digital currencies, Dr Njoroge advises that they should first start with the population and seek clarity on the direct benefits to the population.
“You cannot leave the population behind. You can not say, well, this is a decision of the Monetary Authority and we have the mandate and law. At the end of the day, the population may not buy the whole thing. You can see what happened in El Salvador” Said Dr Njoroge.
The Central bank of Kenya (CBK) in February published a discussion paper on its Central Bank Digital Currency (CBDC) and it sought public comments on the potential benefits and risks, and related policy considerations, of introducing a CBDC in Kenya. Dr Njoroge said they are currently now analyzing the comments received.
Dr Patrick Njoroge also reiterated that the bank’s position on the unrestricted use of cryptocurrencies like Bitcoin in Kenya remains unchanged.