- Cryptocurrency trading in Kenya has been on the boil for quite some time now with banks issuing warnings to customers as well as exchange companies.
- The government had plans to make Bitcoin its reserve currency
- CBK governor is exploring the advantages of an efficient CBDC program
Kenya’s war against cryptocurrency started in 2015 when the Central Bank issued a warning to customers to stay away from digital currencies. Their main concern was the absence of a central authority and investors would stand to lose if the exchange company went bust.
Moreover, the volatility surrounding cryptocurrencies is not favourable for Kenyan’s as it is still considered a developing economy. The investors are majorly from the informal sector and their trading in digital currencies will only improve financial inclusivity.
Furthermore, the country has the second largest peer-to-peer cryptocurrency trading volume. Even after several harsh warnings from banks and CBK, investors are not deterred as they are enjoying the volatility swings and the profits as well.
Bitcoin as a reserve currency
It was in February that the CBK governor, Patrick Njoroge, changed its stance regarding Bitcoin and planned to create a reserve in the digital currency. He also stated the protection that the reserve currency could offer from exploitative loans which in return could hurt their sovereignty.
The IMF also has a part ot play as the world body has stated that the Kenyan Shilling was overvalued and people should avoid using it. Subsequently, the value of Shilling came tumbling down.
The creation of a Bitcoin reserve will be beneficial as it will reduce the country’s debt significantly when the price of the digital currency rises. The distributed ledger technology will give access to validators and investors to keep a track of the path taken by Bitcoin to improve the financial conditions.
CBDC program being explored
Following the footsteps of many developed and developing countries, the governor also plans to launch its own central digital currency for its citizens. Dr. Njoroge was particularly taken aback when it was brought to light that fraudsters could carry out illicit activities via digital currencies. It is also a breeding ground to finance terrorist activities.
A CBDC program will allow the government to keep track of its digital currency, prevent fraud from taking place and help the digital market during tumultuous times by regulating demand and supply. The governor further does not believe in a cashless economy rather a less cash economy would be beneficial.
The governor made the above remarks on the sidelines of the Georgetown’s DC Fintech Week and well understands the niche that cryptocurrencies are in. The government continues to resolve the problems faced by investors as the Bitcoin technology is evolving at a brisk pace.
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