The CBK (Central Bank of Kenya) is working on issuing a digital Shilling. This shows that Africa is gradually opening up to the adoption of CBDCs.
However, the IMF has warned that Kenya’s CBDC could limit private digital currencies. Also, it could harm banks and fintech firms by stealing their customers.
Hence, the IMF has told the central bank to highlight in the CBDC paper how it plans to combat these issues. This is to ensure that digital Shilling does not affect digitalization development in the country.
The CBK Must Promote A Competitive And Open Payment System
According to reports, the IMF (International Monetary Fund) has made some remarks about Kenya’s proposed virtual currency. The agency said the proposed CBDC should not threaten the digital money from the private sector.
Therefore, the IMF asks that the CBK put some measures in place. If the CBK does not do so, it could lower the cost of transactions in the country.
Afterward, it would drive out operators of mobile money like M-Pesa away from the country. As stated by The Nation, the agency talked about the document for the CBK’s virtual Shilling.
The IMF said the CBK must list how it will promote a competitive and open payment system. The agency added that:
“The CBDC paper must state the full intention of the digital Shilling. It should complement and not substitute the existing digital solutions in the country. Also, it should affirm the bank’s commitment to promote a competitive and open payment system.”
CBDC Must Not Harm Banks And Fintech Firms
Meanwhile, fintech firms are not the only ones that might suffer from the central bank’s CBDC. The digital Shilling also threatens the integrity of banking institutions.
It is worthy to say these banks have made great process in terms of digital solutions. The IMF said the CBK’s paper for the digital Shilling must be precise.
Also, it must highlight ways it will ensure the CBDC does not harm fintech and banking institutions. The monetary organization added that it should not steal the customers of digital finance firms and banks.
According to the IMF, this move would stifle the growth of the country’s digital economy. Also, it would lead to a monopoly in the financial sector.
Furthermore, the IMF fears the CBDC might lead to increased charges on banks. Also, the central bank might deny these banks access to certain information from users.
This will be in favor of the central bank and will enhance the growth of digital Shilling. However, this will be to the detriment of banks and other private digital currencies.