Bitcoin is the future, so Central Bank should find a way to take it on board

Bitcoin and other crypto currencies are an alternative to the mainstream central banking system.

Monday January 4 2016

Since the Central Bank of Kenya (CBK) advised Kenyans against using unregulated currencies, debate has been rife about crypto currencies, bitcoin in particular.

However, the discussion has veered off the fundamental question, which is: Should the CBK regulate such currencies?

Are the companies involved in operating an alternative and risky currency or are they just a service facilitating the exchange of money?

A significant number of young people have used at least one form of online monetary services that is not a direct bank-to-bank electronic fund transfer.

These include PayPal, Skrill and Payoneer.

All these services are registered outside Kenya by regulatory bodies such as the Financial Conduct Authority of the UK.

I have found no relevant regulation in Kenya for these platforms although some of them are in partnership with some banks in Kenya.

There are firms in Kenya that facilitate access to money directly on mobile phones (such as M-Pesa) from these online platforms.

The service is faster — less than 20 minutes — but premium-rated compared to banks.

I do not know whether these firms are legally registered or whether they even pay tax.

These companies are in the money service business.

M-Pesa also operates, legally, under a money service business licence.

ALTERNATIVE BANKING

Therefore, one can conclude that M-Pesa offers a more or less similar service or is complemented by these services.

Bitcoin and other crypto currencies are an alternative to the mainstream central banking system.

While it has its controversies — alleged terrorism funding, drug payment facilitation, and money laundering — it is a technology that is gaining traction the world over.

Former US Secretary of Treasury Larry Summers supported the technology, saying he would rather side with the “history of change”.

UK Chancellor George Osborne has also supported the new currency.

The US Securities and Exchange Commission has allowed some bitcoin platforms to trade in stocks, as have several regulatory bodies in Europe.

Some US presidential candidates are accepting bitcoin for their campaign contributions.

It is ironical that the CBK has warned Kenyans to be wary about using bitcoin, yet this currency has enjoyed some of is best days in countries that have been under financial stress such as Greece.

I have done online transactions such as forex trading and I have seen firsthand the simplicity of flexible, easy and fast payments.

On forex trading platforms, bitcoin is traded easily against all major currencies.

The Central Bank of Kenya needs to find a way to regulate this business so that Kenyans can enjoy this flexible system.

Despite CBK’s warnings, people are unlikely to stop using bitcoin and other crypto currencies.

NJOROGE S. MUNYONYO, via email

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