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.”
Keeping 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. The global lender
insisted that if no safeguards are put in place, a digital currency
issued by the Central Bank of Kenya (CBK) can potentially lower
transaction costs to the point of driving out mobile money operators
such as M-Pesa out of business.
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 Do No 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.”
