Kenya on the Path to Cryptocurrency Adoption as CBK Explores its Benefits

Kenya, among seven other countries in Africa, has expressed a firm interest in cryptocurrency adoption.

Data from the Absa Financial Index 2021 shows that the Central Bank of Kenya (CBK) is currently researching the benefits of cryptocurrency in enhancing payments efficiency.

Other countries on the list include banking regulators in Eswatini, Ghana, Mauritius, Morocco, Rwanda, Nigeria, and South Africa.

The exploration of the use of digital currencies is a sign of good hope for the cryptocurrency market in Kenya, especially since the regulator has been slow in supporting its use.

For a long time, there have been perpetual debates surrounding regulation development despite the country experiencing a steady growth in the market.

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The growth has been spurred by institutional investors using bitcoin to make an entry into the market.

The renewed interest stems from a 2019 report presented by the Blockchain & Artificial Intelligence task force that strongly recommended that Kenya accepts the use of cryptocurrency due to the inevitable global trend.

It noted that Kenya’s CBK should look into the creation of a digital currency correlating with an individual’s digital identity.

In June 2020, the CBK commenced discussions with other global central banks regarding the possibilities of entering the digital currency space.

Patrick Njoroge, Central Bank’s Governor, claimed that the move was necessary owing to the mushrooming of private cryptocurrencies which have made the regulator feel left out.

”We are already feeling left out and need to create our own space,” Njoroge said.

The Governor, however, warned that those spaces need to be well mapped out to address such concerns as money laundering and financing of illicit activities.

Across the globe, cryptocurrency adoption has risen to a whopping 880 percent over the past year.

This has been driven by rapid adoption in countries such as Vietnam, India, Pakistan, and other emerging economies says the blockchain analytics firm Chinalysis.

The Global Crypto Adoption Index, which explored the “Geography of Cryptocurrency,” placed Kenya as the leader in Africa regarding cryptocurrency adoption.

The Index gave Vietnam an overall score of 1; India, 0.37; Pakistan, 0.36; Ukraine, 0.29; and Kenya, 0.28.

The score was largely based on three parameters including chain retail value transferred, chain cryptocurrency value received, and peer-to-peer(P2P) exchange trade volume between June 2020 and June 2021.

Kenya, Nigeria, Vietnam, and Venezuela rank high due to huge transaction volumes on peer-to-peer platforms when adjusted for PPP per capita and internet-using population.

In late 2020, a survey by the Wall Street Journal found that due to the pandemic, there was a shift in the use of physical cash in most developed economies, with alternative payment methods or private cryptocurrencies potentially taking its place.

”Central banks are exploring ways to create a digital version of cash: money that is trusted, convenient to use, and widely available to people, for making payments and getting paid,” said the survey.

The Journal also added that digital currencies have the potential to make it easier, cheaper, and faster to move money around.

El Salvador in 2021 adopted bitcoin as a legal tender. This sparked a conversation among governments and the country’s citizens citing its credibility and safety as a formal tender.

Experts have long since warned that cryptocurrencies are a folly since they are not designed to fulfill any of the classic functions of money because their prices are extraordinarily volatile.

Perhaps with the new discussions, better regulations will be developed that will make cryptocurrency adoption in Africa smooth.