Address inclusivity in the planned launch of digital currencies

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Address inclusivity in the planned launch of digital currencies


The Central Bank of Kenya building in Nairobi. PHOTO | DENNIS ONSONGO | NMG

Summary

  • According to the regulator, CBDC will serve as legal tender similar to regular banknotes and coins, but will be settled in electronic form.
  • Various economic analyzes predict that the digital economy will be worth $23 trillion by 2025, and returns on ICT investments will be 6.7 times higher than other sectors.

Earlier this month, the Central Bank of Kenya (CBK) announced its intention to launch a digital currency.

She has solicited public comments to assess the role and applicability of a potential central bank digital currency (CBDC).

According to the regulator, CBDC will serve as legal tender similar to regular banknotes and coins, but will be settled in electronic form. As legal tender, it must have monetary characteristics such as acceptance, durability, portability, divisibility, uniformity, and limited availability.

Various economic analyzes predict that the digital economy will be worth $23 trillion by 2025, and returns on ICT investments will be 6.7 times higher than other sectors.

Kenya has widespread digital infrastructure valued at US$5.48 billion and contributing 7 percent of the country’s gross domestic product (GDP).

According to the Organization of Economic Corporation and Development (OECD), digital inclusion is key to economically empowering marginalized communities and can contribute to greater gender equality.

The internet, digital platforms, mobile phones and digital financial services offer ‘leap’ opportunities for all and can help bridge the gap by enabling women, youth and people with disabilities to earn additional income, improve employment opportunities and Gaining access to knowledge and general knowledge information.

The use of digital tools has increased significantly, partly with the disruption caused by Covid-19.

However, a large part of the Kenyan population, especially in rural areas, is still lagging behind in digital adoption and access to the internet.

A Kenya Digital Rights and Inclusion, 2020 report found that high taxation of IT equipment, appliances and telecom services, limited access to fiber and broadband connectivity, high cost of fiber installation, among others, are the key barriers to digital penetration in Kenya were .

The OECD argues that barriers to entry, affordability, lack of education, and inherent prejudices and socio-cultural norms prevent women and girls from benefiting from the opportunities of digital transformation.

They stress that policymakers must seize the opportunity of digital expansion to promote greater gender equality in the labor market, boost economic growth and build a more inclusive, digital world.

The World Bank adds that access to capital, limited domestic market, availability of data in user-friendly formats, location bias in favor of large technology hubs in Kenya and accumulation of talent and capital in global hubs.

According to a report by the Center for Global Development, as of 2013, the digital divide in developed economies, including the US, Europe and the Arab States, has narrowed by about 3 percent, 1.5 percent and 2 percent, respectively, overall as it widens in the least developed countries and in Africa by three percent and four percent in that order.

For the planned digital currency launch to be successful, the state must ensure a stronger environment of trust, including robust privacy, data protection laws and regulations.

About Sonia Martinez

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