The global economic downturn hitting the world at the moment has left a sour taste in the mouths of government officials as they seem not to be able to wiggle their way out of the challenges.
Several countries in Africa are looking to blockchain technology to help them scale out of the global challenges of which the Republic of Kenya is an indisputable example of informing the grassroots population, which is basically referred to as the unbanked in the world, with a mobile money system that has been modeled by many other countries as a means of creating financial inclusion globally.
However, the model has been based on the traditional financial model of using fiat systems, whereas the revolution of blockchain technology has seen a more trust-based approach where financial transactions can be tracked in an open-source method for all to see and possibly remove any sense of mistrust on the part of users.
In an open forum some time ago, the Central Bank of Kenya (CBK) suggested that a central bank digital currency (CBDC) could potentially improve cross-border payments and efficiency.
However, in a recently released document that discusses CBDCs, the bank acknowledges such digital currencies could also pose risks to the financial system.
The apex bank was skeptical as to how the digital currency would impact the core functions of monetary policy, financial stability, and payment systems oversight as expected of the financial institution.
The Central Bank of Kenya was also concerned as banks could lose a significant volume of low-cost transaction deposits which may lead to an increase in the cost of credit as may be applicable to small businesses and other large businesses as well.
Kenya’s central bank added that a CBDC could potentially shield society from the risk of new forms of private money by providing safer and more trustworthy payment services than new forms of privately issued money-like instruments, such as stablecoins and other cryptocurrencies.
On the other hand, the institution did not rule out the possibility that such a financial product presents an opportunity for cyberattacks which has been the major concern of other governments’ financial institutions globally.
Although, there is a continuous input request from the government by the people to determine how feasible it is to implement the CBDC and also the relative constraints associated with the introduction of the digital monetary system.
In conclusion, the successful implementation of the public discussion could see the possibility where the legalization of the management of blockchain technology and central bank digital currency could facilitate businesses within the nation of Kenya and as such, it would also encourage other blockchain projects to migrate to Kenya as it would be seen as cryptocurrency-friendly and a compliant nation for project development.