The Kenyan shilling could harm the private sector and the country’s financial system as a whole, according to the International Monetary Fund.
The IMF has officially stated that Kenya’s central bank’s proposed digital currency (CBDC) should complement existing private digital money, not threaten it. The global lender insists that if security measures are not put in place, the digital currency issued by the Central Bank of Kenya has the potential to drive transaction costs down to the point of driving mobile money operators like M-Pesa out of business.
“The central bank may say that the purpose of issuing a CBDC is to complement, not replace, existing digital payment solutions in the private sector. But we note that the balance between central bank money and private sector payment instruments is not fixed in time, and there is no correct balance at all,” the IMF says.
In addition to being a threat to fintech companies, the Kenyan digital shilling poses a threat to banks, which themselves have made “noticeable progress in developing digital solutions.” The IMF believes that the Kenyan regulator must make it clear that the proposed digital currency will not harm the country’s financial system. Officials should not stifle long-standing developments in digital technology by taking customers away from banks and other providers of digital financial services.
At the beginning of the year, the Central Bank of Kenya published a report on the opportunities and risks of the digital Kenyan shilling. Public comments and comments were accepted until 20 May.
Source: Bits
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