IMF Warns Kenyan Central Bank Against Introducing a CBDC That Harms Fintechs and Banks – Emerging Markets Bitcoin News

The global lending institution, the International Monetary Fund (IMF) has told the Kenyan central bank that its proposed digital shilling must “do no harm” to existing private sector digital money. The lender insisted the proposed central bank digital currency (CBDC) must “not stifle such welcome digitalisation developments by taking away customers of banks and other digital finance providers.”

Keep the Payment System Open and Competitive

The International Monetary Fund (IMF) has reportedly said the Kenyan central bank’s proposed digital currency should complement and not threaten the existing private sector digital money. According to the global lender, the Central Bank of Kenya (CBK), can issue a digital currency that could lower transaction costs and drive mobile money providers such as M-Pesa out of the market if there are no safeguards in place.

According to a report by The Nation, the IMF, in its commentary, said it wants the CBK’s digital shilling document to outline how the central bank plans to keep the payment system open and competitive.

“The paper could state the intent of potential issuance of CBDC is to complement rather than substitute existing private-sector digital payment solutions, and affirm CBK’s commitment to an open, competitive payment system. We note in this regard that the balance between central bank money and private sector payment instruments is not fixed over time, and there is no ‘right’ balance,” the IMF is quoted as stating.

CBDC must not cause harm

Besides posing a threat to fintechs, the CBK’s proposed digital shilling also poses a threat to banks which have also made “remarkable progress in developing digital solutions.” According to the IMF, the CBK’s digital shilling paper must make clear that the proposed digital currency will “do no harm.” It must “not stifle such welcome digitalisation developments by taking away customers of banks and other digital finance providers.”

The IMF also argued that the digital shilling must also not result in the increased cost of financing for banks, or deny “banks of valuable information they obtain through establishing customer relations.”

Register here for a weekly email update with African news.

Your thoughts? Comment below and let us know how you feel.

Terence Zimwara

Terence Zimwara, a Zimbabwean journalist, writer and author who has been awarded the Zimbabwe Booker Prize. His writings have covered the economic problems of several African countries and how digital currency can offer an escape route.