This was disclosed on Thursday by CBK in a lengthy discussion paper that Kenya have until May 20 to return their feedback regarding the creation of Digital Kenya Shelling.
So the big question is that will CBDC good for Kenya Citizens? Well in some Africa countries such as Nigeria and Ghana have already launched their digital currency. Though, the eNaira is not working as expected and no one seems to be using it [the eNaira is useless in Nigeria].
However, South Africa, Tanzania, Rwanda and many more countries have been conducting research of their own CBDC version of their currency.
What you Need to Know about the Creation of Digital Kenya Shelling.
In this initiative, the CBK hopes to bypass local banks as it will be the central organization to manage the digital currency transactions and statements. In this case, the traditional banks might lose their customer because they have direct connection to the Central Bank of Kenya which may lead them to deal with the CBK directly.
Due to this, local banks might intend to raise interest rate on loans, which might also leads to Financial difficulties.
Introduction of Digital Kenya Shelling can leads to seamless cross border transactions that can be run along side-by-side with mobile money just with phone and internet connection.
However, CBDC major benefit is to ease cross-border payment and compliment mobile money in fiat payment space.
The CBK also creating the digital Kenya Shellin, for retail customers could leads to reductions of deposit from commercial banks to CBDC.
According to CBK, the Digital Kenya Shelling could make the financial system safer by letting non-bank financial institution, individual and business to settle directly in central bank fund, rather than bank deposit.
This would significantly reduce the concentration of liquidity and credit risk in payment systems. This in turn reduces the systemic importance of large banks and PSPs [payment service providers]. However, the central bank would enter into direct competition with the banks and payment service providers it regulates. Said the CBK in the discussion paper.
Digital Kenya Shelling could reduce the effectiveness of monetary policies and enhance the risk of money laundering.
Kenya CBDC could be a greater alternative to cryptocurrencies like Bitcoin and Ethereum. They are decentralized digital currencies which has in the past warned Kenyan against buying because they are mainly used to fraud.
Additionally, Digital Kenya Shelling is not tied to the value of cryptocurrency, rather it has the same value with shelling. For Instance, 1DKS is equal to 1KES.
The International Monetary Fund [IMF] declared that around 100 around countries are exploring CBDCs at different levels, researching, testing and distributing to the public.
China, Nigeria and Ghana has already piloted version of their own physical currency. Whereas, Tanzanian officially declared last year that they are working on to introduce their digital currency and Nigeria is the first country to adapt Central Bank Digital Currency [eNaira] in Africa.