Report: Why central banks will not stop cryptos trade
Kenya’s bid to set up a central bank digital currency framework will not aid in reducing the spread of cryptocurrencies, amidst fears the regulators could lose control of money, according to a new report.
Central Bank of Kenya (CBK) in an online meeting with US-based consultancy firm Accenture ealier this year, discussed modalities of setting up a central bank digital currency (CBDC) to counter the advent of cryptocurrencies.
However, the report by Bank for International Settlement (BIS) economies are becoming increasingly digital, user needs are rapidly evolving, and innovation is reshaping financial services.
“Many of our jurisdictions are seeing falling transactional use of cash, and new forms of digital money issued by the non-bank private sector (such as stablecoins) are emerging,” it says.
“Private digital assets such as bitcoin, Ethereum, Cardano etc could coexist with potential digital currencies operated by central banks,” BIS adds in the report.
Central bank versions would rely on banks and other financial institutions to act as intermediaries to create credit and help safeguard financial stability, it added.
The paper reflects growing anxiety among policymakers that the rapid growth of cryptocurrencies and private sector initiatives around payments could lead to central banks losing control of their money.
“Central banks contributing to this report have already identified that a CBDC could be an important instrument for ensuring that they can continue delivering their public policy objectives even as the financial system evolves,” the study said.
The latest report by Chainanalysis, a UN-backed platform which monitors cryptocurrency trade volumes across the globe shows that Kenya has the most active crypto ecosystem in Africa alongside Nigeria and South Africa.
Central banks of Ghana, Kenya and Rwanda are researching the potential benefits of CBDC in promoting payments system efficiency and stability, fostering competition in the financial sector and boosting economic growth.