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Bitcoin looks to further disrupt East Africa's mobile money market

Kenya , 17 Dec 2015

Bitcoin looks to further disrupt East Africa's mobile money market

Banking regulator, the Central Bank of Kenya (CBK) has described cryptocurrency Bitcoin as unsafe and unregulated.

In a statement CBK said: "The attention of the Central Bank of Kenya (CBK) has been drawn to media reports on the use, holding and trading of virtual currencies such as Bitcoin in Kenya. Bitcoin is a form of un-regulated digital currency that is not issued or guaranteed by any government or central bank."

The CBK added, "Domestic and international money transfer services in Kenya are regulated by the Central Bank of Kenya Act and other legislation. In this regard, no entity is currently licensed to offer money remittance services and products in Kenya using virtual currency such as Bitcoin."

The regulator went on to state that Bitcoin is not a legal tender and therefore no protection exists in the event that "the platform that exchanged or holds the virtual currency falls or goes out of business."

It warned that the public should desist from transacting in Bitcoin and similar products.

Kenya has seen several start-ups established to introduce the use of Bitcoin in the country, including BitPesa and Bitsoko, both backed by seed funding.

BitPesa received US$1.1 million in February this year, while Bitsoko received a US$100,000 grant from the Bill and Melinda Gates foundation in July this year.

M-Pesa competition

Meanwhile, BitPesa is currently embroiled in a legal dispute with Safaricom over the use of M-Pesa.

Online payment company Lipisha has an agreement with BitPesa to allow an exchange between the currency and M-Pesa. However, telecommunications services provider Safaricom is believed to have pressurised Lipisha to drop Bitcoin from its platform.

BiPesa expected the involvement of the CBK during the court proceedings.

Elizabeth Rossiello, the founder of BitPesa (operating in Kenya and Tanzania) said, "The Central Bank of Kenya may or may not make an official statement on digital currencies or Bitcoin during this case, because this case is not about the legality of Bitcoin in Kenya. Rather, it is about BitPesa standing strong against an incumbent, with its internal operations and compliance policies laid bare before the court, proud in its graduation from start-up to scalable contender in the marketplace."

During court proceedings on 14 December it emerged that Safaricom is not compelled to accept the use of Bitcoin and BitPesa was strong enough to operate without the use of M-Pesa.

The trial will continue to determine if the telecommunications company was wrong in forcing Lipisha to not to deal with Bitcoin.

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