Central Bank warns Kenyans against using virtual currencies

Kenyans have been warned against trading in online currencies such as bitcoins, with the Central Bank of Kenya (CBK) noting Tuesday the monies are not legal tender in the East African nation.

There has been increased interest in trade in virtual currencies in Kenya, in particular bitcoins, with some tech-savvy citizens using their mobile money accounts to perform the transactions, including sending more abroad.

The Central Bank has now moved to stop this trade, noting it is illegal and exposes users to risk.

"This is to inform the public that virtual currencies such as bitcoins are not legal tender in Kenya and therefore, no protection exists in the event that the platform that exchanges or holds the virtual currencies fails or goes out of business," warned the CBK in a statement.

The regulator noted that bitcoins are a form of unregulated digital currencies that are not issued or guaranteed by any government or Central Bank.

Kenyans have been using the bitcoins to send money to their kin in neighbouring countries, thus, cutting costs. It costs about a minimum of 5 U.S. dollars to send cash to neighbouring nations from Kenya on mobile money. With bitcoins, one can spend less than half that amount.

The trade in bitcoins to send money to Tanzania and Uganda has been through popular mobile money service Mpesa.

"M-pesa to bitcoin trading means effortless and friction-free connection from Kenya and Tanzania to the global economy, at a low-cost remittance," says a website offering the service.

The Central Bank noted that any domestic and international money transfer services must be regulated and abide by set down regulations.

"No entity is currently licensed to offer money remittance services and products in Kenya using virtual currency such as bitcoin," said the statement.

Analysts noted that Kenyans are embracing bitcoins because it acts like cash, besides making it easier to send money across the border.

"Bitcoins like cash doesn't really leave identity of the person who transacts in it. If you use mobile money, credit card or bank transfer, your reveal your identity including name and address. With bitcoins like cash, guarantees this anonymity," noted Bernard Mwaso of Edell IT Solutions in Nairobi.

He added that while the Central Bank is supposed to regulate all currency transactions, regulating bitcoins is difficult because it happens online.

"The best it can do is just to warn the public but it cannot stop. People have opened their own bitcoin wallets where they place the virtual monies. Central bank has no control over this because they can transact with anyone, in any place across the world," he noted, adding that bitcoins are accepted in different parts of the world, including America, Europe and Asia.

According to the Central Bank, the risks in trading in bitcoins are numerous, making users prone to fraud.

"Transactions in virtual currencies such as bitcoins are untraceable and anonymous making them susceptible to abuse by criminals in money laundering and financing of terrorism," said the CBK, adding that the value of the currencies are speculative in nature, thus, resulting in high volatility in value. Endit