Proposed digital currency to control transaction costs
Kenya is exploring a digital currency regime which is touted as a game changer in the digital currency payment space, with consumers taking full advantage of faster and cheaper transactions.
A sample of economists interviewed by East Africa share the view that the proposed scheme is essential for faster and cheaper payments, including cross-border payments, with fiercer competition expected with existing mobile money payment platforms, leading to a lower transaction costs.
Central Bank Digital Currency (CBDC) is intended to serve as legal tender.
“Digital currency will be a game changer in many ways. The quick wins will be lower transaction fees and the ability to move small amounts of money to where most Kenyans are.
“Thus, it will make financial services accessible to even more Kenyans,” said Ken Gichinga, chief economist at Mentoria Economics.
“The central bank should also benefit as it will be spared the printing costs associated with physical currency and there will be many more innovations to come that will be possible through digital currency.
“The challenge of the current payment system will be for them to be more innovative but they will continue to coexist.”
Mr Gichinga said digital currency will put more pressure on existing players in the market to be more innovative and price competitive.
Dr Samuel Nyandemo, a senior lecturer at the University of Nairobi’s faculty of economics, said the CBDC will force other competitors to be more innovative and perhaps revise tariffs.
“The focus will be on affordable mobile financial services by cutting out middlemen, which will bring fierce competition to other digital currency providers such as M-Pesa, Airtel Money and T-Kash.”
“But the Kenyan economy is ripe for digital currency.”