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The State of Bitcoin in Kenya

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Since the early days of bitcoin, many believed that the digital currency would end up banking the unbanked in developing regions such as Africa. While bitcoin adoption in Africa has made some commendable steps forward, its use as a payment method is yet to have a far-reaching impact. Despite this, the African continent has seen the establishment of some well-known bitcoin economies of which Kenya is one of the most prominent.

In this article, you will gain an insight into the state of bitcoin in Kenya and learn about the challenges that bicoin startups are facing in this East African economic hub.

The Bitcoin Ecosystem in Kenya

Kenya is one of the African nations where bitcoin use has continued to gain significant momentum, which has led to the development of a thriving local bitcoin economy.

As more African countries awaken to the adoption of bitcoin, only Kenya, Nigeria, Ghana, and South Africa provide promising bitcoin ecosystems that incorporate bitcoin liquidity, local bitcoin communities, startups, and meetups.

Kenya’s bitcoin ecosystem boasts regular meetups, a co-working space and accelerator focused on blockchain technology, is home to several bitcoin startups and exchanges, is experiencing an increasing demand for bitcoin and a community that’s well-versed in mobile money usage.

BitPesa – Kenya’s Leading Bitcoin Startup

There would be no talk of bitcoin in Kenya without the mention of BitPesa, its leading local bitcoin startup. Nairobi-based BitPesa was launched in 2013 with the aim to provide businesses and individuals with a cheaper alternative of making international payments to and from Africa by leveraging bitcoin as a payment method. The use of bitcoin has enabled BitPesa to lower payment costs in and out of Africa by 50 percent.

BitPesaSince its establishment, BitPesa has been able to raise more than $10 million in funding from leading venture capital firms that are focused on blockchain technology to expand to other markets. The venture capitals that funded BitPesa include Draper Associates, BitFury Capital, Blockchain Capital and Digital Currency Group.

With over 17,000 transactions and more than 6,000 users, BitPesa’s current operations are in Kenya, Tanzania, Nigeria, Senegal, Democratic Republic of Congo, Uganda, and the United Kingdom. The payment platform allows businesses to process payments in over 30 currencies across borders.

Initially, BitPesa started its operations targeting private individuals who were looking for alternative means of remitting money. However, they have since changed their model and have started to offer their services to businesses. Changing their model to focus on B2B clients and enabling them to make cross-border transactions has not only seen their expansion into other African markets but has continued to shape the BitPesa success journey enabling it to raise further funding in 2017.

Despite the strong growth of BitPesa’s trading volumes in Africa, however, it has been forced to seize KES payments due to the pushback of the Kenyan central bank against bitcoin and bitcoin-related startups in September 2017. Unfortunately, BitPesa is not the only bitcoin startup facing difficulties when it comes to banking in Kenya due to the central bank’s very clear negative stance on the digital currency.

Central Bank of Kenya’s View on Bitcoin

Following an embroiled court case between BitPesa and Safaricom – Kenya’s largest telecommunication network – in December 2015, a statement warning the public about the use of bitcoin was issued by the Central Bank of Kenya (CBK) across various newspapers. In part, the warning stated:

“virtual currencies such as bitcoin are not legal tender in Kenya and therefore no legal protection exists in the event that the platform that exchanges or hold the virtual currency fails or goes out of business…”

In the eyes of the CBK, the anonymous nature of bitcoin payments makes it, “…susceptible to abuse by criminals in money laundering and terrorism financing”.

Following this directive by the CBK, no known directive or clarity has been offered on the use of bitcoin or on any other form of digital currency.

However, it has become known that the Central Bank of Kenya has communicated to local banks not to perform any business whatsoever with bitcoin startups. Following this communication, several bitcoin startups such as BitPesa had their bank accounts shut down. This, of course, poses a challenge to new and existing bitcoin startups who want to operate in the country.

Kenya’s Blockchain Hub

The opening of a blockchain-focused startup incubator and co-working space by BitHub.Africa in 2016 in Nairobi made Kenya the first of a kind in the East African Community to house one.

BitHub AfricaBitHub.Africa was founded in 2015 by John Karanja, a former employee of BitPesa. His desire was to create a space that would help drive the adoption of blockchain technologies and solutions in Africa. BitHub.Africa has a co-working space, an accelerator for startups that are interested in creating blockchain solutions, and provides consulting and advisory services for

BitHub.Africa has a co-working space, an accelerator for startups that are interested in creating blockchain solutions, and provides consulting and advisory services for organisations that are interested in blockchain technology.

Blockchain Technology in Kenya

Unlike bitcoin, blockchain technology is very welcome in East Africa’s largest economy. As BitcoinAfrica.io reported on September 14, several industries in Kenya are implemented blockchain solutions to improve their services.

The National Transport and Safety Authority (NTSA) announced that it will be mandatory for Kenyan vehicles to have electronic stickers. The electronic motor identification service will ensure that all drivers have the stickers on the windscreens of their cars and will be detected by use of special gadgets. This move will help in the recovery of stolen vehicles and rid Kenya of unsafe old cars. The service will operate on a shared blockchain platform that will link key state agencies like the Kenya Police and the Kenya Revenue Authority together.

Furthermore, Kenya’s health sector will make use of blockchain technology through the installation of a smart platform that will enable all public hospitals to monitor important patient data such as a patient’s health history as well as for the use of public health and hospital management.

In the insurance sector, America Insurance Group (AIG) has partnered with banking group Standard Chartered to launch a pilot using blockchain technology where it ran cover offers for their policyholders across America, Kenya, and Singapore. The pilot saw the two companies process real-time payments for their clients on a unified blockchain-powered platform that linked their agents and financial institutions.

Needless to say, industry in Kenya is discovering the benefits of blockchain technology for itself and many more applications using the distributed ledger technology are expected to follow.

Bitcoin Adoption in Kenya

One of the major setbacks bitcoin adoption has faced in Africa is the high cost of the Internet and a lack of Internet connectivity. As it stands, Internet penetration in Africa is at 18 percent, which is substantially lower than the acceptable global average rate of 30 percent. Many rural areas in some African nations are quite distant from cable stations making Internet connectivity expensive and inefficient.

Besides being one of the two countries in Sub-Saharan Africa with leading telecommunication development, Kenya’s Internet penetration stands at 66 percent which is the highest in Africa. This has made Nairobi – the capital of Kenya – a hub for many tech startups and is famously known as Silicon Savannah. Moreover, in Africa, according to data from McKinsey, Kenya leads in the adoption and use of mobile payment with 86 percent of houses having active mobile money accounts.

While these elements make Kenya a conducive environment for bitcoin startups, there are a handful of entrepreneurs that have adopted the use of bitcoin in providing solutions in the region. Besides BitHub.Africa and BitPesa, Umati Blockchain, BitSoko, Belfrics Kenya, and Remitano are other startups that are making use of bitcoin in Kenya.

paid in bitcoinBitcoin merchant adoption in Kenya, on the other hand, is nothing to write home about. Currently, there are only a handful of companies in Kenya that accept bitcoin payments for their services as stated by CoinMap, a platform that gathers and lists traders that take bitcoin. These include two tech companies, two travel agents, and three e-commerce shops.

According to several members of the bitcoin community in Nairobi, bitcoin use is prevalent among the youthful tech-savvy generation who receive bitcoin payments for their freelance work or are buying them for investment purposes.

The Future of Bitcoin in Kenya

With a bitcoin-unfriendly central bank, international bitcoin startups are finding it hard to break into the Kenyan market and homegrown startups are struggling to get off the ground. Nonetheless, bitcoin adoption is on the rise in Kenya as can be witnessed by trading volumes on LocalBitcoins.  Even the national media has been reporting about bitcoin, which has boosted bitcoin awareness in the East African nation.

Should the Central Bank of Kenya change its view on the use of cryptocurrencies, Kenya would have the potential to become a leading global bitcoin economy as the country benefits from a well-educated driven young generation of entrepreneurs and developers in Nairobi’s Silicon Savannah who are very capable of developing new bitcoin and blockchain business solutions if they were to receive the regulatory stamp of approval and support from local authorities.

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Belfrics to Launch Bitcoin Exchanges Across Africa

Belfrics

Belfrics Global is a Malaysian bitcoin trading platform that has recently announced plans to open exchanges across Africa. The company aims to capitalise on the demand for cryptocurrency services in African nations that are experiencing increasing bitcoin adoption rates. Belfrics hopes to drive financial inclusion in the continent through its bitcoin exchanges and other digital services for both individuals and merchants.

Belfrics Launches in Kenya

The company which operates in Eastern Asia, India, and the Middle East, launched its Belfrics bitcoin exchange in Kenya on 29th July. Speaking to members of the bitcoin community in Nairobi during the launch, Belfrics Chairman and CEO, Praveen Kumar explained some the services local consumers can access from the exchange aside from bitcoin trading.

“Our bitcoin exchange aims to bring down the cost of money transfers within Kenya using blockchain technology. Along with the bitcoin exchange platform, we will also be providing POS and payment gateway solution for merchants and will be providing white label solutions for exchanges,” he stated.

According to Belfrics, they have received positive responses from consumers in the past few months, as it has been running test trials in the country. Praveen explained the positive results of the trail runs encouraged their decision to change their market strategy by entry into African cryptocurrency markets.

For Kenyans, the exchange will be instrumental in enhancing mainstream adoption for bitcoin. The platform offers a new alternative for bitcoin trading with a five percent commission on transactions and with no limit on the amount of bitcoin that you can purchase.

Regional Expansion

According to Praveen, the company plans to open exchanges in Ghana, Nigeria, and Botswana, with other countries to follow. Belfrics hopes to become the largest liquidity provider for bitcoin trading in fiat currencies and set a target to reach 100,000 investors in Africa within its first year of operations. If the company’s success in Kenya is anything to go by, then achieving such a target is not far from the realms of possibility.

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