CBK warns against using bitcoin and other unregulated digital currencies in Kenya

Tuesday December 15 2015

The Central Bank of Kenya has warned against

The Central Bank of Kenya has warned against the use of bitcoin and other unregulated digital currencies in Kenya, saying they are insecure and could be used to fund terrorism. FILE PHOTO | JENS KALAENE 

As the role of bitcoin and other unregulated digital currencies grows, the Central Bank of Kenya has joined other authorities from around the world to warn that virtual money is insecure and could be used to fund terrorism.

The Central Bank has linked the use of bitcoin and other illegal tenders in Kenya to terrorism and money laundering due to the untraceable nature of their transactions.

The CBK has also warned that the digital money platforms expose users to potential losses due to lack of underlying or backing of assets and the value of the virtual currencies.

In a public notice, the bank described itself as the sole regulator of currencies in the country.

“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,” said the notice.

The move comes a day after a High Court judge issued a preliminary ruling that telecoms operator Safaricom will not be ordered to reinstate Bitpesa’s access to the M-Pesa mobile money service.

Safaricom said BitPesa, with whom it shares a partner, did not meet its anti-money laundering requirements.

LICENSE VIRTUAL CURRENCIES

Safaricom, therefore, called upon regulators to license the virtual currency exchanger in order to connect to its customers.

Responding to the ruling, BitPesa CEO Elizabeth Rossiello called the judge’s decision a win.

“That Safaricom has moved against us shows that we have already won,” said Ms Rossielo in a blog.

Prior to the CBK’s ruling on virtual currencies, Ms Rossielo was confident that the case would not concern the Central Bank since the matter did not touch on the legality of the business.

“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,” said Ms Rossiello.

The CBK has warned that it will not protect users in the event the platform that exchanges or holds the virtual currency fails.

“Virtual currencies are traded in exchange platforms that tend to be unregulated all over the world. Consumers may therefore lose their money without having any legal redress in the event these exchanges collapse or close business. The public should therefore desist from transacting in Bitcoin and similar products,” reiterated the CBK.