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Daily Nation : February 11th 2014
6 smart company business intelligence Tuesday February 11, 2014 DAILY NATION EYEING OPPORTUNITIES » CENTRAL BANK OF KENYA ADMITS RECEIVING INTERESTS FROM COMPANIES WISHING TO LINK LOCAL PAY High cost of sending cash back home forcing people to look for alternative ways From Bangla-Pesa to bitcoin, Kenyans’ I BY MUTHOKI MUMO email@example.com In the run-up to the expected launch, the company declined to comment on its progress in Kenya. In response to questions from t takes less than five minutes to sign up for a Kipochi wallet, a service which should link an M-Pesa account to the volatile world of bitcoin. Kipochi is a service that was launched last year with the aim of using the virtual currency, bitcoin, for remittance and money transfer across borders. In Kenya, Kipochi’s selling point is that subscribers can use their MPesa accounts to purchase bitcoin. People living abroad can also transfer the value of bitcoin to M-Pesa accounts in Kenya. However, on Friday last week, Smart Company could not buy any bitcoin via the platform. The reason given was on-going upgrades to the service which “should be available again soon”. Despite the technical hitches, Kipochi is in the vanguard of services that may be offered increasingly to Kenyans as bitcoin entrepreneurs turn their eye to markets in the developing world. BitPesa is another bitcoin money transfer service eyeing East Africa. Smart Company, the Central Bank of Kenya (CBK) said there had been interest from firms looking to link Kenyans and local payment systems to bitcoin. “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,” said the regulator in a statement. Bitcoin is a virtual currency whose use and value has grown exponentially since its inception in 2009, putting to question the traditional roles adopted by governments in regulating the flow of money. Unlike traditional fiat currencies which partly derive their value from the faith that users put in the issuing governments, bitcoin is not created, regulated or backed by any Central Bank. Instead of being minted or printed, bitcoin is digitally-mined. Using computers, miners solve complex math problems online. For Bitcoin is a virtual currency whose value has grown exponentially. Right, BanglaPesa, a currency that is used at the Coast. PHOTO | FILE each solution, bitcoins are awarded. This stands in contrast to statebacked currencies whose circulation is determined by central banks. Bitcoins exist wholly in the digital realm. Users can buy them, store them in electronic wallets and use them to buy goods and services. An increasing number of merchants globally are coming to accept bitcoin as a valid form of payment. Although the conversation sur- rounding bitcoin is just taking off in the developing world, commentators say that bitcoin entrepreneurs could find a niche in these markets. Remittance transfer services such as Kipochi have hit one of those niches. Money transfers are increasingly becoming vital to economies in Africa and Asia. The cost of sending money, however, remains punitive. In Africa, the World Bank esti- mates, the cost of sending money is equivalent to 10 per cent of the transaction. Bitcoin money transfer services have tried to compete with firms such as Western Union by offering significantly lower fees. Inflation-proof Bitcoin has also proven particu- larly attractive in that it seems to be inflation-proof. The value of fiat currency is often at the whims of central banks. Bitcoin, which is outside this regulatory fold, is not similarly affected by inflationary pressures. Further, bitcoin enthusiasts point out that the finite amount of currency that can be mined (produced) is in-built immunity against inflation. The limit for the number of bitcoins that can be mined is 21 million. As of Friday, 12.3 million bitcoin had been mined. “Inflation is the one of the blights of frontier markets. Investors are often hit by collapsing currencies and bitcoin could provide a more secure alternative,” said ABC Capital’s manager of corporate finance and advisory, Mr Johnson Nderi. The currency’s volatility is, how- ever, a cause for concern. The price of a bitcoin rose from $13:40 in January 2013 to peak at $1,120.40 in November last year. Since then, the HOW BANGLA-PESA CAME TO THE LIMELIGHT Mid last year, Bangladesh slum in Changamwe, Mombasa, hogged the limelight after reports that it had introduced its own currency — Banglapesa — to act as a substitute to Kenyan money. The government arrested the mas- terminds, accusing them of using illegal currency. However, Koru, the organisation behind the programme, said the aim was not to replace the shilling but to offer a complimentary currency. According to Koru website, a Bangladesh Business Network (BBN) has more than 200 businesses using the currency. Launched in the Bangla-Pesa cur- rency in May 2013, the credits are issued in the form of paper-vouchers that can pass from hand to hand as payment for goods and services. One gets to the system through a process of finding four guarantors. By using Bangla-Pesa to buy goods and services at fellow BBN member businesses, they also accept to sell their own goods and services for Bangla-Pesa. price has been on a general downward trend. Mr Patrick Murck, a lawyer for the Bitcoin Foundation, a lobby organisation that standardises and promotes the use of bitcoin globally, has been quoted by Bloomberg saying that it is an “experimental currency” that “should be considered a highrisk environment.” Nevertheless, growth in accept- ance of bitcoin has regulators across the globe scrambling to establish a regime to ensure that it does not subvert the use of state-backed currency or provide an alternative payment mode for criminals.
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