The Central Bank of Kenya (CBK) revealed that it will be using Bitcoin to combat various economic crises threatening the country. This move has revealed a contrasting view that many other countries hold towards the digital asset.
Kenya’s apex bank announced its intentions to embrace Bitcoin as a haven from economic difficulties. The CBK stressed that systemic, fiscal, and monetary challenges are major factors that have hindered the country’s growth.
Bitcoin to the Rescue
Governor of the CBK, Patrick Njoroge, said that using the digital asset could help ease the country’s unstable currency. Njoroge elaborated that Kenya is currently vulnerable due to a shortage of foreign currencies and exorbitant loans, which he believes cryptocurrencies can salvage.
“Our decision to shift to Bitcoin is both tactical and logical. Our currency has always been the punching bag for the International Monetary Fund which always claims that the Kenya shilling is overvalued,” Njoroge explained.
Njoroge highlighted the possible benefits of adopting cryptocurrencies and mentioned that Kenya’s debt has been on a steep increase while forex rate gaps continue to widen. The Governor believes that using Bitcoin will protect the country from foreign exchange losses.
Moreover, given Bitcoin’s significant gains in recent times, the central bank hopes to benefit from possible future appreciation in value.
This development has gained mixed reactions from the citizens of Kenya. Economist and poverty consultant Mihr Thakar commented that Bitcoin’s adoption could generate revenue for developing countries. He added that it would challenge the oppressive financial system’s status quo, which favors developed countries. Thakar believes that the current state of things puts smaller countries on the receiving end.
The recent plunge into BTC by Tesla CEO Elon Musk may have further strengthened the CBK’s decision to consider the use of Bitcoin. Musk recently announced that Tesla had invested about 1.5 billion in Bitcoin as a portion of its cash reserves.
On the other hand, some citizens expressed concerns about this change in tune due to potential backlash from leading countries that do not support the development.
Fighting COVID-19 with Digital Payments
Even before now, Kenya has been a big adopter of digital forms of payment. Its stance on Bitcoin is a far different than its neighboring Nigeria. Last week the central bank of Nigeria announced a crypto ban on the use of virtual assets. It was even recommended that financial service providers dissociate themselves from Bitcoin users.
Meanwhile, Kenya ramped up its adoption of digital currencies as a way of fighting COVID-19 during the primary outbreak stages of the pandemic. The CBK tried to achieve this by removing transaction costs for transfers below 1,000 shillings (~$10). This aimed to encourage the use of digital payments among its citizens to prevent the spread of the virus.
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