The IMF warned the Central Bank of Kenya against the introduction of the state digital currency

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The Kenyan shilling could harm the private sector and the country's financial system as a whole, according to the International Monetary Fund.

The IMF has officially stated that the proposedBy the Central Bank of Kenya, digital currency (CBDC) should complement existing private digital money, rather than threaten it. The global lender insists that unless safeguards are put in place, the digital currency issued by the Central Bank of Kenya has the potential to reduce transaction costs to the point of driving mobile money operators such as M-Pesa out of business.

“The Central Bank may say that the purpose of the issueThe purpose of CBDC is to complement, not replace, existing digital payment solutions in the private sector. But we note that the balance between central bank money and private sector payment instruments is not fixed over time, and there is no correct balance at all,” the IMF says.

In addition to the threat to fintech companies, the KenyanDigital shilling poses a threat to banks, which themselves have made “notable progress in developing digital solutions.” The IMF believes that the Kenyan regulator must make it clear that the proposed digital currency will not harm the country’s financial system. Officials should not stifle long-term developments in digital technology by taking away customers from banks and other digital financial services providers.

At the beginning of the year, the Central Bank of Kenya published a report on the opportunities and risks of the digital Kenyan shilling. Comments and comments from the public were accepted until May 20.