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Bitcoin faces resistance in Kenya despite a vibrant community

The third world country unexpectedly for many has become a pioneer of mobile banking around the world. Will Kenya be able to successfully adopt cryptocurrencies as well? Our author from this East African state gives a first hand information to answer this question.

State of Bitcoin in Kenya

Kenya, East Africa’s economic hub is one of the most prominent bitcoin economies in Africa. Bitcoin use has gained significant momentum leading to an uprise of a highly enthusiastic community. Even the national media has been reporting about bitcoin, which has spiked bitcoin awareness in the East African nation.

Bitcoin use in Kenya is popular among the young tech-savvy generation who receives bitcoin as payments for freelance work or buys them for investment purposes.

Kenya’s bitcoin community can boast of holding regular meetups, blockchain-based accelerator hubs, several bitcoin startups, and exchanges. 

On a go slow

Statistics have it that Bitcoin trading volumes have been very slow to grow from 2015 to the end of 2016. However, 2017 has seen a substantial increase in peer-to-peer bitcoin trading in the country as can be witnessed by trading volumes on LocalBitcoins. The drop possibly was a result of the directive issued by the Central Bank of Kenya (CBK).

Much like other countries, Kenya’s regulatory body CBK has not formally banned Bitcoin and altcoins. However, it has distanced itself from cryptocurrencies describing them as not legal tender in Kenya. It has discouraged use of bitcoin and other digital currencies implying they could be a conduit for terrorist financing and money laundering.

The regulator in pursuit of its functions has however gone a step further; instructing banks not transact or partner with businesses that use cryptocurrencies. In this regard, no company is currently licensed to offer money remittance services and products in Kenya using cryptocurrencies Bitcoin.

The Capital Markets Authority of Kenya (CMA) has however announced plans to holds a forum that will give enable fintech players to air their grievances. In addition, the forum set for 2018 will allow regulators in-depth understating of the technology.

Where it all started

There would be no bitcoin in Kenya without Bitpesa. Launched in 2013, Bitpesa’s goal was to provide businesses and individuals’ a cheaper alternative to making international payments using Bitcoin.

Bitpesa’s which operates in over six countries has helped lower payment costs in and out of Kenya and Africa by 50 percent. The firm, which has been able to raise more than $10 million in seed funding, has over 6000 active users in Kenya.

One of Bitpesa’s leveraging tools was M-PESA. Through this platform, users would exchange bitcoin into Kenyan shillings and make remittances via M-PESA.

While BitPesa is still a company operating in Kenya, it is barred from servicing Kenyan customers.

Merchants accepting Bitcoin

One of the major setbacks in Bitcoin trading in Africa is lack of or high cost of internet. Kenya, however, has an internet penetration of 66 percent, highest in Africa. Furthermore, Kenya leads in the adoption and use of mobile payment with 86 percent of households having active mobile money wallets. These factors make Kenya conducive for bitcoin, however only a handful of businesses have adopted its use.

According to Coinmap, there are less than five merchants accepting bitcoin in Kenya. And it is only possible in Nairobi, the capital of Kenya. These include online travel agents, e-commerce shops, and small tech companies but no brick and mortar shops. Besides BitHub.Africa and BitPesa, Umati Blockchain, BitSoko, Belfrics Kenya, and Remitano no other startups are making use of bitcoin in Kenya.

Blockchain hub

Kenya is home to the first blockchain-focused startup incubator in the East African community. Bithub Africa, which also hosts a co-working space, is the brainchild of John Karanja, a former employee of Bitpesa. BitHub Africa serves as an accelerator for startups that are interested in creating blockchain solutions and provides consulting and advisory services.

Digital money

Kenya is not new to the concept of digital money. Mobile money is big in the country. Kenya though Safaricom, operates a digital payment platform, MPESA. Use of the now famous platform is prevalent in all parts of the country.

The widespread use of MPESA was however necessitated by lack of infrastructure from banking industry rather than advancement in technology. MPESA that came into existence in 2007 was to make the usage of money more accessible for people without access to banking services. With MPESA, you load money onto your mobile wallet at a local agent and send money as simple text.

Telecoms do not support Bitcoin

Safaricom – Kenya’s largest telecommunication network, hauled BitPesa access to MPESA. This happened due to the claim that BitPesa and other similar remittance businesses did not comply with Kenya’s anti-money laundering laws.

The telecom company insisted that Bitpesa needed clearance from the CBK for it to continue operating on its network. This ensued in a court embattlement that Bitpesa lost.

Bitcoin mining

Crypto mining is a costly venture. The high cost of mining equipment relative to the average income in Kenya and lower rewards of mining are big obstacles in this country. Electricity is also very costly and solar power is not popular. This has made crypto mining near impossible.

Future of Bitcoin

While bitcoin adoption in Kenya has made some excellent steps forward, widespread adoption will not happen soon, unless the large number of obstacles is resolved.

Bitcoin is a decentralized currency, and the only jurisdiction the CBK can truly exercise is over Kenya’s national currency, the Kenyan Shilling (KES). However, Bitcoin exchanges have to take into consideration and contend with the laws governing the fiat currencies that they are transacting with.

Should the Central Bank of Kenya rescind its stand, Kenya could become a leading Bitcoin economy in Africa. The country has a well-educated vibrant generation in its Silicon Savannah capable of transforming Kenya using the technology.

M-PESA is proof that all it takes is user adoption for big financial companies to get on board with digital platforms. Bitcoin community needs to grow in numbers for it to gain clout.

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