The fact the Central Bank of Kenya (CBK) has issued the “strongest ban on digital currencies in Africa, Europe and North America” is a serious hindrance to the development of the sector in the East African country.
That is according to Elizabeth Rossiello, chief executive officer (CEO) of Kenyan digital currency-based payments platform BitPesa the lack of clear regulation hinders uptake of any innovation.
BitPesa, which launched in Kenya in 2013 and also operates in Nigeria, Tanzania, Uganda, the DRC, the UK and Senegal, secured a new investment round last week to take its total investment secured to date to nearly US$10 million.
Yet for all this funding Rossiello says the startup is unable to operate in its home country because of the stance taken by the CBK, which has discouraged use of bitcoin and other digital currencies by suggesting they are illegal and could be a conduit for terrorist financing and money laundering.
“We have been working closely with the Nigerian Central Bank and have a great dialogue with other Central Banks in East, Central and West Africa, but we have still made little progress in Kenya, which remains the strictest jurisdiction in Africa, having gone out of its way to ban any bank from banking or partnering with companies using this technology,” Rossiello said.
“While BitPesa is still a tax-paying, registered Kenyan company with a large office for its finance, trading, customer support and sales functions for the region, it is blocked from servicing Kenyan customers. This is a total shame, given that the company and the African bitcoin boom it started when it launched, began in Kenya.”
She said the CNK made the call to outlaw BitPesa and other such companies without creating a consultative committee for public comment, without conducting any in-depth research, and without cooperating with any companies working in the space.
“Even their own statements are not clear – and have contradictions within. This is a misstep for the Central Bank of a country supposedly known for its technology and financial services innovation,” Rossiello said.
She compared the CBK’s stance with those of the World Bank, International Monetary Fund (IMF), the World Economic Forum (WEF) and the Central Banks of “nearly every major economy in the world”, which are publishing positive research on the technology and permitting the right businesses to gain licensing and compliantly grow in their markets.
“Why would the CBK not have a transparent process to promote innovation? When the digital leaders of the world, from Estonia, to the UAE, to Singapore are creating major regulation to welcome bitcoin and blockchain companies into their economies, why would the CBK crush the chances of its own home-grown companies to operate in this space and show Kenya as a safe, transparent and welcoming incubator for efficient innovation?” she asked.
“The actions of the CBK have impeded the growth of a revenue-generating, internationally compliant young company using this technology. Why would they block us from showcasing Kenya?”
Rossiello also said the stance of the CBK was in stark contrast to that of users and investors, all of whom are increasingly attracted to bitcoin startups.
“We have seen our clients in six African markets be very enthusiastic in their purchase and use of bitcoin – but mainly our clientele uses it as a means to effect a global payment. We do not advocate or recommend that our clients use bitcoin for investment, as we are a payment company,” she said.
“However, customers in the markets which we operate do love to invest and participate in global financial products on par with the rest of the world. So we say the uptake or use of digital currencies like Bitcoin is as popular in Africa as anywhere else. People are the same, they like innovation.”
The recent Finnovating for Africa report released by Disrupt Africa detailed exactly how attractive blockchain and digital currency startups are to investors, and Rossiello said this was due to the fact startups in the space are building low-cost, secure and efficient products for consumers that actively need them.
“There are problems to be solved in financial services, identity, and record-keeping that are perfectly addressed by this technology, among others,” she said.