[WATCH] Over 50% of Kenyans use feature phones and a CBDC would block them, says central bank governor

As the Central Bank of Kenya (CBK) continues to gather public views around a Central Bank Digital Currency (CBDC), the Governor has revealed that it is not yet considering whether to adopt a Retail or wholesale CBDC.

So far, 2 main types of CBDCs are being considered by central banks around the world.

  • Wholesale CBDCs – available for financial institutions
  • Retail CBDCs – accessible to the general public (i.e. consumers and businesses)

According to the Governor, the CBK is “agnostic” in the CBDC model, adding that in addition to a model where every Kenyan has a CBDC account with the apex bank, they may well adopt a system where Kenyans can hold CBDC accounts with other institutions which could be banks or telecom operators.

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SEE ALSO: Bank of Ghana unveils final details of its ongoing CBDC pilot project

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With the design of CBDCs largely in his recent chat with local TV channel CBK Gorvernor, Patrick Njoroge revealed how seriously they take the issue adding that CBDCs are not special and they could suffer breakdowns and other weaknesses typical of existing financial systems. . Therefore, the strengths and weaknesses of the CBDC will depend on its underlying technology and design.

Njoroge, who named CBDC projects in Nigeria, the Bahamas and Eastern Caribbean states, reminded viewers that among these, some projects suffered outages.

His remark was likely referring to the Eastern Caribbean CBDC, the first to go live, which suffered a technical outage for about two months since January 2022.

The CBK appears to be very attentive to public opinions as the Governor says it is weighing the benefits and costs of the various designs that would be required for the CBDC.

For Njoroge, the direct benefits include:

  • Gives full transparency on transactions compared to Fiat
  • Transactions anytime and anywhere

While adding that there may be more possible benefits, a lot is still unclear.

One such case is whether the CBDC would provide the banker with a better monetary policy tool, saying it might, but they’re not sure.

Along the same lines, the Governor emphasized that any possible benefits must be weighed against the safety and cost of implementing the CBDC. While it may seem that a CBDC will be cheaper in terms of relieving the bank of minting costs, the Governor reminded people that it would also introduce maintenance costs.

Above all, Njoroge mocked those who seem conclusive that new technologies (distinguishing stablecoins) would improve the financial system, indicating that there is no evidence in this regard. For him, there is no guarantee that a CBDC will improve the financial system, especially in the case of Kenya.

To highlight his sentiment, Njoroge added that for the 17% of the Kenyan population who are outside the financial system, CBDCs do not seem to be the way to include them as it will not solve their problems:

  • Lack of digital identification
  • Lack of cell phones
  • Cultural/gender issues

The Governor is also concerned that 2G and 3G technology may not be sufficient to support a CBDC-based financial system, and implementing CBDC with 4G technology may end up excluding more Kenyans from the system.

As such, he indicated they were running things without too much urgency – saying they might even decide to put the idea on hold.

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RECOMMENDED READING: [WATCH] Nigerian Central Bank Digital Currency eNaira – Africa’s First CBDC – Goes Live

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