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The State of Bitcoin in Kenya

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state of bitcoin in Kenya

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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November 30, 2019: OKEX and BitcoinKE Partner for a FREE Crypto Margin Trading Class

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FREE Crypto Margin Trading Class

After a full-house event in Nairobi for the CrypTour through Africa, OKEx is back again to host its popular Genesis Trading Classe, titled “Crypto Margin Trading.”

The class will cover the following:

  • Basics of crypto trading
  • Trading tools
  • Margin trading
  • Reading of trading charts
  • Trading psychology
  • among other topics.

You don’t want to miss this exciting class!

Come and network with other crypto enthusiasts over drinks and snacks. There will be a jam-packed list of speakers who will also be joining for this class.

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EVENT DETAILS:

DATE: SATURDAY, 30TH, NOVEMBER 2019

TIME: 11:00 AM – 5:00 PM

VENUE: MARBLE ARCH HOTEL, LAGOS RD, OFF TOM MBOYA STREET, NAIROBI, KENYA

REGISTER: http://bit.ly/BITCOINKEOKEX2019

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Retired NBA Player Allegedly Scammed Ghanaian Company Out of $825,000 in Bitcoin

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NBA Player

Retired NBA player, Isaac Edward Austin, has allegedly scammed a Ghanaian Company out of $825,000 in bitcoin (BTC). The money was reportedly acquired with the promise of investing it in a bitcoin automated trading programme.

Bitcoin Investment Scam

bitcoin doublerThrough the Isaac Edward Austin (IEA) and Tudor Trust, Austin reportedly masqueraded as a trustee with the ability to help a Ghanaian company make a profit on a bitcoin investment. The two parties signed a contract on July 3, 2019. This contract is among other documents that have been shared on mynewsgh.com indicating the scam took place.

The company sent to a bitcoin investment at a strike price of $11,000 per bitcoin, totaling to $825,000, to Austin expecting to receive back the original investment plus profits. However, Austin failed to make the payment at the close of trading as per the agreement.

A victim of Austin’s scam shared his experience as follows: “He will take your BTC and you will never get your investment back or your returns. On the day of payment, he will tell you story after story filled with lies of issues why the BTC could not be delivered on the day of payment. From him having a heart attack, to the coin being sent to the wrong wallet, to him being in a queue at the bank, to him waiting for the trade to conclude, to the funds being held by the bank. Week after week after week of unresolved issues even when he has confirmed the day before that all is set 1000 percent to deliver and conclude the transaction. He is a fraudster of the highest order. Stay away from him. We have all the proof – contracts, letters, and messages.”

One of the other documents mynewsgh.com obtained is a letter sent to Austin notifying him of his failure to meet the agreed terms of the contract. The Ghanaian company expected their money back on the same day they signed the contract with Austin. The funds expected should have been 75 BTC going for a strike price of $11,000.

In the letter, the company gave Austin 48 hours to pay them their money – failure to which they were going to take legal action.

Is the Scammer an Imposter?

According to the documents shared on Ghana Web, the bitcoin scammer’s date of birth and height is similar to the former NBA player, Isaac Edward “Ike” Austin as indicated on Wikipedia. So, could this be a case of a retired basketball player turning into a scammer or is someone impersonating him? The answer to this question is unclear.

This LinkedIn profile of an Isaac Austin, who has been the Finance Director and Trustee of Tudor Trust and Finance Society LLC since June 2012, does not seem authentic. Although this profile has some similarities to the former NBA player’s personal information as written on Wikipedia, the years he attended Arizona State do not coincide.

Furthermore, the profile on LinkedIn says Isaac Austin took a Bachelor’s Degree in Liberal Arts and Sciences for one year which is not the usual study period for a degree course. There is also no mention of the former NBA player being a trustee of IEA and Tudor Trust.

The upturn of the crypto market experienced in mid-2019 appears to have spurred scammers into action. This scam comes after another bitcoin investment deal in Nairobi went wrong between December 2018 and May 2019.

That said, these scam stories are a lesson to potential bitcoin investors that they are better off managing their own investments as opposed to handing funds to someone to manage them. If the Ghanaian company had carried out thorough research, perhaps they would have noticed the obvious red flags.

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The Golix Controversy: Has the African Exchange “Exit Scammed” Users And Investors?

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Golix exit scam

Prior to May 2018, Zimbabwe-based bitcoin exchange Golix was bullish about its future prospects. The startup claimed it had raised $32 million from a token sale and had plans to set up operations in several other African countries. However, more than a year later, the digital asset exchange has had a reversal of fortunes and, after its forced shutdown in Zimbabwe, some of Golix’s former clients are struggling to get their funds reimbursed despite promises and frantic efforts to recover these. 

Embezzlement Allegations

Former Golix users now point to possible embezzlement of funds by Golix executives while one investor in the startup blames the hostile operating environment as the reason for the company’s general failure.

Tawanda Kembo was the chief executive officer (CEO) of Golix when it was shut down in Zimbabwe. Bitcoin Africa reached out to him to get his side of the story but he had not responded to our questions at the time of publishing.

However, Bitcoin Africa still managed to contact Taurai Chinyamakubvu, an individual who says he was an investor in the company. Chinyamakubvu claimed he is not aware if client funds had been reimbursed or not since he was not involved in the day to day affairs of the crypto startup.

“On funds, you can check with the CEO, he was doing the day to day stuff. I was just an investor,” Chinyamakubvu pushed back when asked if they had recovered client funds that were reportedly locked in banks.

In May 2018, Zimbabwe’s central bank issued a directive that forbade financial institutions from dealing with crypto exchanges. According to Golix, this led to banks blocking access to client funds and the company from using the financial system.

Central Bank Defiance And Crypto Adoption

GolixWhen asked why Golix had not resumed operations following a High Court ruling that set aside the central bank order, Chinyamakubvu suggested that Golix’s Zimbabwe operations remain hamstrung by the central bank’s reluctance to lift the order.

“They (Reserve Bank of Zimbabwe) did not lift the order they sent to banks. So no bank wants to defy a regulator. But that said, you muddy the water once, that’s enough to change its colour for a while,” he stated.

Chinyamakubvu is convinced that the central bank’s apparent defiance of a court ruling continues to hinder the growth of the crypto space in a country that should be embracing privately-issued cryptocurrencies.

Zimbabwe has been plagued by hyperinflation for the past two decades, which is spurred on by a volatile fiat currency. Critics point to the central bank’s penchant for unrestrained printing of money as the main cause of the country’s currency troubles.

The Golix investor called the central bank’s decision to shut down the crypto exchange ‘retrogressive’.

Ironically, the Reserve Bank of Zimbabwe recently announced the setting up of a committee to study financial technologies such as bitcoin. The regulator now says it wants to come up with what it calls a “National Fintech Strategy.”

Disappeared Client Funds

Bitcoin Africa also reached out to former Golix clients as it tried to establish what happened with their funds. Some did not respond but a few did – although they requested anonymity. One lady, in particular, expressed exasperation with the way Golix has been handling the issue.

“I do not know about others but I still have not been reimbursed. Tawanda (CEO of Golix) has made several promises to settle but nothing has happened,” claimed the lady who preferred to remain anonymous.

She further explained that currently there is nothing noteworthy happening but promised to reveal more details as and when they become known. 

Kembo on the Run?

Following the central bank decision to stifle cryptocurrency trading, some crypto traders have gone on to create informal trading platforms using social media networks like Whatsapp, Telegram, and Facebook.

Bitcoin Africa was also able to get access to one such Whatsapp chat group feed wherein clients are discussing strategies of recovering funds from Golix. In a discussion that occurred in July 2019, one member of the group asks fellow members to furnish her with information that includes Kembo’s personal identification number or even a vehicle registration number. This could then be used to help a hired tracing agent to locate him.

Tawanda Kembo

Tawanda Kembo, Golix CEO

It is apparent from the discussions that Kembo has made several promises – including re-payment plans – to reimburse but nothing has happened to date. Adding intrigue to the controversy, this client claims Tawanda told them he had lost the key to the cold storage wallet. Thus, he could not access the bitcoin.

Keys to a crypto wallet are essentially a passcode that grants access to funds and without them, the funds are lost and cannot be recovered.

In the meantime, another post on the same thread suggests that Chinyamakubvu was being disingenuous when he expressed ignorance about the status of client funds. In the post, another member insists that prior to the central bank order, Golix was asked to remove all funds before accounts were closed.

The anonymous member was referring to a part of the central bank circular to banks which states the following:

“Exit any existing relationships with virtual currency exchanges within sixty days of the date of this Circular and proceed to liquidate and restitute existing account balances.”

This central bank circular was issued on May 11, 2018, and Golix seemingly had enough time to exit from banks as well as to reimburse clients.

No Consumer Protection

The anonymous member suggests that since this did not happen, the issue should now be treated as a criminal case.

It is apparent from the rest of the discussion that members were aware of the risks involved with crypto businesses. The central bank had warned the public of risks of dealing with cryptocurrencies and associated businesses prior to Golix’s demise.

Zimbabwe does not have consumer protection laws that specifically deal cryptocurrencies and those dealing with such digital currencies do so at own risk, a point clearly articulated by the central bank circular. Perhaps it is with this in mind that some Golix clients are now pursuing fraud charges against Golix executives.

Lack of legal protection is another factor inhibiting the widespread adoption of cryptocurrencies but that may yet change as the central bank is now having a change of heart.

Bitcoin Africa will continue to follow the events surrounding the alleged exit scam of Golix and update our readers when new information surfaces.

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