To use or not to use? This is the question that many businesses are asking themselves regarding cryptocurrencies.
Despite this global ambivalence over the adoption of the digital currencies, the fact is that they gradually seeping into the business world as more traders embrace it. For the proponents of the currencies, they are an idea whose time has come and businesses that ignore them can only count losses.
In Kenya, the currencies are beginning to take root and there are now a number of outlets using them as a medium of exchange.
Among the places where you can trade on bitcoin include a lounge at the Kenyatta University, an automated teller machine (ATM) in Nairobi’s Westlands, an electronic shop located on Luthuli Avenue in Nairobi, a hotel in Nyeri, and most recently a supermarket in Mombasa.
“We have received tonnes of requests from our customers to pay using digital currencies,” said Boxlight Electronics chief executive Robinson Murage in an interview in July.
“As a company whose 90 per cent of customers are young, tech savvy and predominantly online, we choose to be all inclusive and adapt to the needs of those that prefer this type of currency.”
The ATM in Nairobi, which is a first in East Africa, makes it possible to buy bitcoins and litecoins instantly in cash. It allows traders to buy the cryptocurrencies in small tokens for as low as $5 (Sh500), and pay for them in dollars or Kenya shillings.
In Mombasa, a member of The Billion Coin (TBC) Kenya, Bernard Wambua who has traded with the currency for about two years, says the coastal town has over 2,000 people using the digital currency.
“You can do big transaction of millions of shillings using TBC. The population of people using the e-money in Mombasa is increasing at a very fast rate,” said Mr Wambua in a recent interview.
He said they are planning to integrate more businesses to use the currency.
In July, the Nyeri hotel — Betty Place Restaurant— proprietor said three customers had paid their bills using bitcoins,a transaction equivalent of Sh4,000.
“We convert the local currency equivalent using the value of the bitcoin. The bitcoin can go up to the eighth decimal place, for instance 0.00000001 of a bitcoin. You can pay a bill of anything from Sh100 upwards,” said Beatrice Wanjiru Wambugu, the hotel owner.
Despite this rising uptake, experts say the digital currencies still have a long way before they attain all the characteristics of an authentic currency. Cryptocurrencies, they say, have limited adoption and they are yet to be universally accepted in the intermediation space.
“Even though they are being used for purposes of making payments, we have not seen savings, loans and transactions of that nature being in this space of cryptocurrencies,” said Jared Osoro, director of research and policy at the Kenya Bankers Association (KBA), last week.
“There is a long way to go for cryptocurrencies to actually make their way into intermediation space, meaning scaling beyond the payment space – what the bulk of financial technology (fintech) firms are helping.”
Financial sector experts aver that a genuine currency is not only a medium of exchange but also a unit of account, and store of value. Although the digital currencies, are a medium of exchange albeit in a limited way, they do not meet the other attributes as a unit of account and store of value.
Mr Osoro’s comments were echoed in a public forum held last week in Nairobi:
“A cryptocurrency does not meet all the characteristics of what a currency is”.
There is also the lingering question of volatility of cryptocurrencies, especially in Kenya where investment on them is no more than a speculative affair. Moreover, they are neither guaranteed by the central bank nor backed by government regulations.
Investors are totally on their own, the Central of Kenya (CBK) governor Patrick Njoroge warned.
The CBK in the latest bank supervision annual report says these emerging disruptive technologies bring with them various forms of risks.
Notably, the report says, among the new digital products is cryptocurrencies that is associated with anonymity, and commonly used by criminals.
“CBK reiterates that it does not recognize cryptocurrrencies as legal tender. CBK is of the opinion that despite the ubiquitous positive influence of technology, there lies a potential of great risk in the event that the technology fails or is misused by unscrupulous individuals. There is thus the need to ensure that robust controls are in place to ensure that the risks and opportunities associated with emerging technologies are balanced,” CBK says in the Bank Supervision Annual Report 2017.
Mr Osoro, however, says although a number of uncertainties surround adoption of cryptocurrencies, they nonetheless hold a promise of opportunities.
“These are the realities that financial institutions must contend with as they embrace these new emerging technologies in a manner that is going to enable them tap opportunities,” said Mr Osoro.
Promoters of the digital currencies in the country, while admitting that insecurity episodes of hacking and stealing of bitcoins have occurred, they are becoming less frequent over time.
Another line of argument in favour of digital currencies is that they are cheaper than many conventional options for remittances or money transfers and can be very convenient for instance for smartphone payments , to the extent that transactions are settled quickly.
There are more than 700 so-called cryptocurrencies out there in the world, but bitcoin is the best known.
Bitcoin started trading in 2009 – exchange rate then, $0.0007 (Sh0.07) per bitcoin. In February 2011, it reached parity with the dollar.
In November 2013, the value of bitcoin peaked at $1,242 (Sh124,200), and it has been trading at about $900 (Sh90,000), rising to about $19,000 (Sh1.9 million) by December 2017, before declining to its current level of about $7,000 (Sh7,000).
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.