Bitcoin, Mpesa, and Kenya. Can it really work? RazkanApril 2, 2014 There’s a lot of speculation on whether or not Bitcoin will get widespread adoption in Kenya. To clear up some misconceptions, I – as a Kenyan citizen – will shed some light on the realities of Bitcoin, M-PESA and whether or not the cryptocurrency can work in Kenya. There are many variables that need to be considered but I’ll mainly write about the new services which could make Bitcoin a hit in Kenya, while looking at the hurdles the currency may face. Let’s start by talking about M-PESA, the micro-financing service offered by Kenya’s largest mobile network, Safaricom. It’s considered to be the most developed mobile payment system in the world and 43 percent of Kenya’s GDP is handled by the service. M-PESA is celebrating its 7th year and has over 17,000,000 active users. The service is what every Bitcoin evangelist uses as irrefutable proof that Bitcoin can work on a large scale in this country. There is just one problem: there is currently no Bitcoin wallet service integrated with M-PESA and there is no sign of it ever happening any time soon, but that shouldn’t matter. I personally believe Bitcoin will work best in this country if it stays away from major corporations which run monopolies on Kenya’s communications technology. If you have been following the whole “Bitcoin is going to become the next currency in Kenya” debate then you must have heard about Kipochi (the first Bitcoin wallet made for Africa) when it was launched last year. Kipochi (it means wallet or purse in Swahili, a clever catchy name actually) is a wallet that turns your phone number into a Bitcoin account. It’s basically M-PESA on steroids. M-PESA allows users to send money to any registered account in the country quickly and easily. Kipochi allows users to do the same but with BItcoins and it isn’t limited to Kenya. You live in the U.S and want to send your girlfriend in Kenya some money? Kipochi could do it instantly, but … Kipochi doesn’t actually work Enthusiasts from all around the world showered a lot of praise on Kipochi when it was launched. It was a huge step for Bitcoin and it had great potential, but unfortunately, the service doesn’t work and there’s an unconfirmed rumor saying it got blocked a few days after its launch. To see if the rumors are true, I tried using the service. A friend sent the BTC equivalent of a dollar to my Kipochi account and to my dismay, it didn’t go through. It also seems Kipochi can’t even work as a regular wallet since the transaction is not listed in my history. I don’t know where the money went and I have sent a message to the support team asking if the service has any issues. I’ll update this if I get a response. The CEO and co-founder Pelle Braendgaard (Twitter: @PelleB) could not be reached for comment. What Kipochi tried to do – despite the fact that it doesn’t work – is a huge step for Bitcoin in Africa but it had its limitations. Only people with access to the Internet can use the service, and while the number of Internet users rises every year (it was around 12 million in 2012) I am skeptical about the number of smartphone users who would adopt the service and learn what Bitcoin is, and its advantages. M-PESA works so well because even shit tier mobile phones with no connection to the Internet can use the service. All you need is a registered Safaricom simcard and you’re good to go. I believe this – along with the convenience of the service itself – is the main reason why M-PESA has been such a success in Kenya, Tanzania, South Africa, and recently, in India and Afghanistan. Even people in the most remote of villages make use of the service and a lot of them don’t even understand how the Internet works. If Kipochi was adopted, it would have been limited to users who are tech savvy enough to learn about Bitcoin. This is where 37Coins comes in … 37Coins: a simple way of performing Bitcoin transactions via SMS to the rescue Prior to 37Coins, you needed to have a working Internet connection to make transactions. Even Kipochi is currently limited to the web with plans for an app in the works. With a simple and easy to use SMS transfer system, Bitcoin could actually become a reality in Kenya. There are around 44 million people in Kenya and around 80 percent have mobile phones. If Bitcoin is to become relevant, I believe this is the best way forward. An SMS based method of performing transactions that’s safe, tax free, and affordable could help compliment or even replace M-PESA, which has been increasing its transaction tariffs to keep up with the hefty taxes imposed by the Kenyan government. This brings up the question of whether … Will the Kenyan government allow the adoption of Bitcoin? In a statement given to Kenya’s Daily Nation, the Central Bank of Kenya said: “The Central Bank has been contacted by some entities that are proposing to use bitcoin. The entities have been informed of the laws, regulations and procedures required to offer remittance services in Kenya. However, no applications have been received by the Central Bank for approval to transact in bitcoin….The operators have been advised of the process to undertake in order to comply with remittance regulations, including compliance with anti-money laundering laws and combating the financing of terrorism laws and regulations.” The indifference in the statement implies that the Kenyan government doesn’t think Bitcoin will get too far any day soon, but don’t let it fool you, the government will probably be opposed to the widespread use of Bitcoins. Money laundering and the use of mobile payment systems to fund terrorism is a real problem in the country. M-PESA recently started collecting more information on its customers in an effort to reduce the likelihood of the service being used as a tool for criminal activity. The semi-anonymous nature of Bitcoin makes it the perfect tool for such activities, or that’s what the government will say anyway and the terrorists and money launderers will pay attention. The fact that there’s currently no way to tax people who use the service doesn’t exactly help matters, or does it? Perhaps the success of a remittance service which uses Bitcoin like BitPesa could help highlight the usefulness of the currency to the Kenyan government and the general public, but it’s too early to know for sure. BitPesa is a digital currency platform which offers Bitcoin remittances in Kenya at a third of the cost of bank transfers or other money transfer services like Western Union. A bargain really when compared to the 10-12% charged by companies like Western Union and Moneygram. Kenyans living abroad send back approximately $1.2 billion a year and many of them use these overpriced services. BitPesa was supposed to start on a trial basis this month after obtaining regulatory approval but there hasn’t been any updates so far. This will be pretty big if it works but getting financial regulatory approval in Africa is no cakewalk. BitPesa, Kipochi (should it ever work), and 37Coins are the perfect platforms for introducing Bitcoin to Kenya and their success or failure should indicate whether or not Bitcoin can work in Kenya. Perhaps the government will be against it, but what can they really do about it? These are problems every country is going to have to face at some point. For both the unbanked and the banked, Bitcoin could become a godsend. No more paying extortionate fees for remittance services and no more waiting for days to get your money. I’m betting that it can work here but it’s just gonna take a lot of hard work.