[kictanet] Public Notice by CBK on Virtual Currencies

Wed Dec 16 05:25:54 EAT 2015

On Dec 15, 2015 11:07 AM, "Ngigi Waithaka via kictanet" <
kictanet at lists.kictanet.or.ke> wrote:
>
> Very dicey...
>
> Let's see... What is MPesa? It's a Virtual Currency that has a 1:1
Mapping with the Kenya Shilling. That's why when I send you MPesa, you
don't receive a legal tender, but you know you can convert it to KES at a
rate of 1:1 minus the small charges.

Mpesa is backed by equivalent shillings deposited to reflect the actual
amount in your mpesa account. Let us call mpesa a bank account, because
that is what it is. Is your bank balance a legal tender?

>
> What is Paypal? a Virtual Currency that has a 1:1 mapping with say USD

PayPal too is an account that reflects real money controlled by a central
bank earned by offering goods or services.

>
> What is BitCoin? A Virtual Currency that has a *fluctuating* mapping with
other currencies e.g 1:130 with USD.
>
> If I take the risk that BitCoin might fluctuate, a risk we also take when
we get paid in USD / Euros etc when in Kenya, why should it be illegal?
>
> Its just a Virtual Currency, one of many....

This is where the analogy gets wrong. Mpesa and PayPal are real cash
deposited into an account. The cash is controlled by a central bank
depending on the currency.

Bitcoin on the other hand is a digital currency that is created and held
electronically without an equivalent hard currency cash deposit, unlike the
ordinary legal tender, and is not a government-backed unit. Bitcoins are
created as a reward for payment processing work in which users offer their
computing power to verify and record payments into a public ledger. This
activity is called mining and miners are rewarded with transaction fees and
newly created bitcoins. A good analogy is the virtual coins you get as a
reward when you play computer games like Temple Run. Although bitcouns are
obtained by mining, bitcoins can be exchanged for other currencies,
products, and services. A better analogy is the way I can sell my mangoes
and apples, and IT skills for $$$.

All that said, we should accept that bitcoin can provide legitimate
financial services.

>
> Regards
>
> On Tue, Dec 15, 2015 at 10:00 AM, Josiah Mugambi via kictanet <
kictanet at lists.kictanet.or.ke> wrote:
>>
>> CBK has taken a stand:
>>
>>
https://www.centralbank.go.ke/index.php/news/464-public-on-virtual-currencies-such-as-bitcoin
>>
>> Extract:
>>
>> ++++
>>
>> The attention of the Central Bank of Kenya (CBK) has been drawn to media
reports
>> on the use, holding and trading of virtual currencies such as Bitcoin in
Kenya.
>> Bitcoin is a form of un-regulated digital currency that is not issued or
guaranteed by
>> any government or central bank. 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.
>>
>> This is to inform the public that virtual currencies such as Bitcoin are
not legal
>> tender in Kenya and therefore no protection exists in the event that the
platform that
>> exchanges or holds the virtual currency fails or goes out of business.
Some of the
>> risks associated with buying, holding or trading virtual currencies
include the
>> following:
>>  Transactions in virtual currencies such as bitcoin are largely
untraceable and
>> anonymous making them susceptible to abuse by criminals in money
laundering
>> and financing of terrorism.
>>  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.
>>  There is no underlying or backing of assets and the value of virtual
currencies is
>> speculative in nature. This may result in high volatility in value of
virtual
>> currencies thus exposing users to potential losses.
>>
>> CBK reiterates that Bitcoin and similar products are not legal tender
nor are they
>> regulated in Kenya. The public should therefore desist from transacting
in Bitcoin
>> and similar products.
>> ++++
>>
>>
>> --
>> Josiah Mugambi
>>
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>>
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>>
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>
>
>
>
> --
> Regards,
>
> Waithaka Ngigi
> Chief Executive Officer | Alliance Technologies | MCK Nairobi Synod
Building
> T +254 20 525 0750 |Office Mobile: +254 716 201061 | M +254 737 811 000
> www.at.co.ke
>
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> The Kenya ICT Action Network (KICTANet) is a multi-stakeholder platform
for people and institutions interested and involved in ICT policy and
regulation. The network aims to act as a catalyst for reform in the ICT
sector in support of the national aim of ICT enabled growth and development.
>
> KICTANetiquette : Adhere to the same standards of acceptable behaviors
online that you follow in real life: respect people's times and bandwidth,
share knowledge, don't flame or abuse or personalize, respect privacy, do
not spam, do not market your wares or qualifications.
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