CRYPTO IS HERE

Kenya is finally softening its stance on blockchain technology

Obsession
Future of Finance
Quartz africa
Obsession
Future of Finance
Quartz africa

Kenya has for years regarded blockchain technology and digital currencies with suspicion, comparing bitcoin to a “pyramid scheme,” and emphasizing that it had no legal footing.

That wariness has been shared by the governments of Egypt, Nigeria, and Tanzania, and by giant telecom operators such as Safaricom—35% of which is owned by the Kenyan government—which terminated bitcoin trading platforms like Kipochi from using their dominant mobile money service M-Pesa.

But Kenya softened its stance last week, and announced that the government is setting up an 11-member task force that will study the benefits and challenges associated with blockchain technologies. The directive came days after president Uhuru Kenyatta said the nation needed to explore the opportunities in the new technology, especially in sectors such as land, where creating foolproof digital registries could forestall malpractice and parallel ownership.

Kenya might also find ways for blockchain technology to help boost its digital money services. As a global leader in mobile money, creating a framework to help integrate bitcoin trading with M-Pesa will allow millions of people to swap funds and send money home or abroad. That is, of course, if the virtual currency catches on in Kenya. As a dominant player, Safaricom already has shown a marked interest in the way forward—and the head of its corporate affairs, Steve Chege, is a member of the task force.

Kenya’s announcement was welcomed by blockchain enthusiasts, who hope it will increase the momentum among consumers and startups trying to use bitcoin for online payments, cross-border transfers, or remittances. Michael Kimani, the chairman of the Blockchain Association of Kenya, said the top-level recognition and the possibility of blockchain legislation could encourage investor interest. This, he said, could also help Kenya match the already growing interest in the sector in countries such as Nigeria and Zimbabwe.

Kimani says that officials have slowly been reducing their opposition to blockchain distributed ledgers, with some arguing that the benefits would outweigh the potential risks. One person helping champion this is the minister for information, communications, and technology, Joe Mucheru—a former Google executive who recently sold his stake in the bitcoin-dealing firm BitPesa. Mucheru has consistently urged the central bank to introduce laws regulating the companies trading on bitcoin, guide users on social saving and investment, and introduce frameworks for ministries to use blockchain technology for efficiency and transparency.

However, the obscurity and decentralization associated with blockchain, Kimani says, has discouraged the government from thinking of the technology as viable. But, he argues, banning it isn’t the answer.

“When they ban it or say you can’t build a business that allows you to convert Kenya shillings to cryptocurrencies, the informal market thrives,” he says. “And once it goes informal, it becomes harder and harder [to regulate].”

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