Central bankers of Kenya and Nigeria criticize cryptocurrencies and promote digital currencies

June 10 (Reuters) – Cryptocurrencies jeopardize financial stability, but central bank digital currencies could solve problems like bringing the poor into the financial system or cutting transaction costs, Kenyan and Nigerian central bankers said Friday.

Nigeria’s eNaira digital currency, introduced last October, is a plus for inclusion, said Kingsley Obiora, deputy governor of the country’s central bank, in a virtual event moderated by African International Monetary Fund director Abebe Aemro Selassie.

Its launch – the first by an African central bank – was met with skepticism by industry pundits and cryptocurrency users, and Obiora did not disclose how widely it is used. Read more

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Kenya could follow suit with its own digital currency to reduce the down payment and costs of cross-border transactions, central bank governor Patrick Njoroge said.

Both central bankers were critical of cryptocurrencies, with Obiora claiming they weren’t stable enough to be a payment method.

“The volatility it creates can become a source of instability in the system,” he said.

Crypto assets have thrived in Nigeria, despite a ban on banks from managing them since February 2021. read more They have also proved popular in Kenya, despite central bank warnings about their risks.

“There was a lot of hype,” Njoroge said of cryptocurrencies, noting the relatively low number of transactions per second possible with bitcoin. He suggested that cryptocurrencies could be regulated as a “rich commodity”.

Njoroge said the central bank was considering responses to a public consultation on a central bank digital currency. Read more

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Financial inclusion, he said, is a less urgent need than in Nigeria given the high use of mobile money in Kenya.

South Africa, which is involved in a digital currency pilot with Malaysia, Singapore and Australia, also cited cross-border payments as a potential use. Read more

Njoroge and Obiora said fuel price inflation triggered by Russia’s war in Ukraine was causing problems, with the Nigerian banker noting that ordinary people were suffering the most.

“We are under a lot of pressure from this, let’s say as collateral damage, especially the price of fuel,” Njoroge said. “We hope that the G7 will resolve the issue with the Russians and whoever else is exporting oil and then reduce its price.”

Kenya’s central bank raised interest rates by 50 basis points last month, the first hike in nearly seven years, to try to tame inflation.

Nigeria also raised its benchmark rate in May, with a 150 basis point increase the first in more than two years. Read more

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Reporting by Rachel Savage; Editing by James Macharia Chege and Emelia Sithole-Matarise

Our standards: Thomson Reuters Trust Principles.

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