Digital Shilling

CBK tests market with digital Kenya shilling.

SUMMARY:
The Kenyan version of the Central Bank Digital Currency (CBDC), whose introduction has been under debate for the last few years, will be exchangeable on a one-to-one basis with physical cash.

It will enable customers to bypass banks, with the CBK taking on a new role of keeping track of holdings, transactions and settlements.

Kenyan banks have in recent years seen their profitability rise to record levels, driven by higher interest and non-interest income.

The proposed Central Bank of Kenya (CBK) digital currency will for the first time allow Kenyans to directly keep cash at the apex bank, placing it in direct competition with commercial banks for deposits.

The Kenyan version of the Central Bank Digital Currency (CBDC), whose introduction has been under debate for the last few years, will be exchangeable on a one-to-one basis with physical cash.

It will enable customers to bypass banks, with the CBK taking on a new role of keeping track of holdings, transactions and settlements.

The CBDC is being eyed mainly to ease cross-border payments and complement mobile money in the local digital payments space.

The CBK on Thursday invited the public to give their views on the potential introduction of the digital currency, in a shift from its original opposition to crypto assets.

The regulator noted, however, that having its own digital currency for retail customers could lead to a migration of deposits from commercial banks to the CBDC.

This, it warned, would have far-reaching effects on the ability of the lenders to continue offering sufficient credit to the economy.

“A CBDC could make the financial system safer by allowing individuals, private sector companies and non-bank financial institutions to settle directly in central bank money, rather than bank deposits,” said the CBK in the discussion paper.

“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.”

Banks rely on customer deposits for funds to lend to both the private sector and the government as part of their role as financial intermediaries in the economy.

Losing deposits, especially those accessed at low cost, would squeeze bank interest margins, forcing them to raise the cost of loans to mitigate the risk of lower profits.

“If significant deposit balances are moved from bank deposits to CBDC, banks’ ability for credit creation could get constrained. Since central banks cannot provide credit to the private sector, the impact on the role of bank credit needs to be well understood,” said the CBK.

“While a significant shift from deposits to CBDCs can pose risks to financial stability, this could be controlled if the banking sector is given sufficient time and flexibility to adjust.”

The CBK added that it could also stem the shift in deposits by not paying any interest on cash held in form of the digital currency, which would allow banks to compete by offering a return on funds held in their accounts.

Kenyan banks have in recent years seen their profitability rise to record levels, driven by higher interest and non-interest income.

They access low cost savings, paying an average of 2.5 percent in savings rate and 6.5 percent in deposit rate, while lending to customers at an average of 12.1 per annum.

It will enable customers to bypass banks, with the CBK taking on a new role of keeping track of holdings, transactions and settlements.
assets.

The regulator noted, however, that having its own digital currency for retail customers could lead to a migration of deposits from commercial banks to the CBDC.

This, it warned, would have far-reaching effects on the ability of the lenders to continue offering sufficient credit to the economy.

“A CBDC could make the financial system safer by allowing individuals, private sector companies and non-bank financial institutions to settle directly in central bank money, rather than bank deposits,” said the CBK in the discussion paper.

“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.”

Banks rely on customer deposits for funds to lend to both the private sector and the government as part of their role as financial intermediaries in the economy.

They are also able to lend at similar interest rate levels to the government on a risk-free basis through purchase of bonds.

A digital currency could curb the effectiveness of monetary policy and increase risks of money laundering, the CBK said.

The regulator, however, highlights a number of advantages in issuing a digital currency for the economy, which include easing and lowering costs of cross-border payments with other jurisdictions that design similar currencies.

“CBDC could potentially shield the public 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 stable coins,” said the CBK.

Tanzanian officials said last year they were working on a directive from the president to prepare for the introduction of digital currencies.

In Africa, Ghana and Nigeria have already piloted their CBDCs, while Kenya, South Africa, Rwanda and Tanzania have been conducting research ahead of rolling out their own versions.

The Bahamas, China, and the Eastern Caribbean Currency Union —which have actively rolled out their digital currencies— have placed limits on holdings of CBDCs to prevent sudden outflows of bank deposits into the digital currencies.

A shiet coin it will be. who would want to hold on that when the economy is on its death bed… We only buy and hold Dallaz.

Ati tuende kwa bank that is owned by KRA to open an account to run our businesses.

Are these people nuts, who’s going to do that?

Think of the Good side …
This is the next best thing since MPESA …

Banks have been screwing us for ages …
Real shylocks …
They pay you interest in single digits and collect in double digits for loans …

With this new system, you bypass them and deal directly with the Central Bank …

You can now see what I have been saying. Kenya is a copy-paster nation Now CBK is busy copying other people’s strategies. I am waiting for it to fail. because this one is bound to fail. Put your eyes

Power should be decentralized, not concentrated in the hands of a few people or institutions.

There are so many things that could go wrong if we let the govt control our finances.

CBK has 3 advantages over main street banks :-

1/ they can undercut and offer rates unsustainable by banks
2/ they don’t need approval from any regulators.
3/they can Transact directly with other central banks and multilateral institutions.

they will be competing directly with other crypto currencies and the chances of them coming on top are slim to none.

@rexxsimba ndirangu kumbe kuna wakati hua unapost some intelligence. Now we can debate on a worthy cause.

shillingi ya kenya iwe coin, iwe noti, iwe digital, iwe aje, ni ile ile, haiva value

amen

A digital coin will be terrific for cross currency transactions. Think about it… if you could buy usdt with KES digital coin then you convert it to real usd in an exchange. You will cut out the banks with their poor exchange rates and fees.

Hapo Sawa …:smiley:

Ok …
Debate … :D:D

Nah, we hodl gold bullions.
On a serious note, a digital shilling is a way for the elite to steal and shaft the economy. What is wrong with Mpesa and bank EFT digital money?

First invite Njoro to the table. I will also take on Amb. Ukur, na ule jamaa mwingine Dr Thug. Im playing at that level msee. @uwesmake @Wanaruona wapewe kandarasi ya kupiga picha

hii discussion sishikanishi, mimi bora nalipwa as agreed natumia as per my means mambo ya pesa na banks siko radar kabisa. Bora bei za vitu zikuwe affordable kwa common man pia

CBK wants to have its own MPESA not Ethereum! Instead of withdrawal & sending charges at an MPESA Agent being so high, CBK will lower them.

Note, the CBK wants MPESA like Digital Currency.
The GoK controls finances using Monetary Policy and Fiscal Policy!
Also other ways the GoK controls your finances is by taxation. Right now Evans Kidero was forced to account for all his wealth!

Even MPESA was copied!
If you want to become the MD/CEO, Rich and or Wealthy; You visit Cities abroad in China (used to be Shanghai, nowdays it is Guangzhou, Shenzhen) or South Africa, or United Kingdom, or United States and implement something that you saw happening in that country here in Kenya. Then, all of a sudden, everybody calls you for advice.

Bora tu wa.shaft MPESA na charges zao BS