The International Monetary Fund (IMF) has recommended special safeguards for M-Pesa and banks from unfair competition by the planned digital shilling by the Central Bank of Kenya (CBK).
The proposed Central Bank Digital Currency (CBDC), which is currently under public discussion, is seen as a competitor to mobile money down the road, especially in its ability to lower transaction costs.
It may also pose some relative threat to banks because it will enable customers to bypass lenders, with the CBK taking on a new role of keeping track of holdings, transactions, and settlements.
The CBDC is being eyed mainly to ease cross-border payments and to complement mobile money in the local digital payments space.
With these competition concerns, the IMF is now urging caution as the CBK progressed with preparation for the possible adoption of a digital currency, saying the CBDC should complement existing private sector digital money.
“Given Kenya’s financial sector’s remarkable progress in developing digital solutions, it is important that the paper emphasises CBDC will “do no harm” and does not stifle such welcome digitalisation developments by taking away customers of banks and other digital finance providers, increasing the cost of financing for banks, or depriving banks of valuable information they obtain through establishing customer relations,” the IMF as quoted by Nation.
Read also; IMF Sets Loan Condition for Kenya to Drop Fuel Subsidy by October.
