M-Pesa stands on the path of cryptocurrency.Many people think it’s easier for Kenyans… | Author: Daniel Nyairo | The Capital | June 2021


Many people believe that Kenyans are more likely to accept encryption because of M-Pesa. But, unfortunately, it turns out to be the opposite.

In terms of adopting cryptocurrency, Kenya is a unique market in Africa and the rest of the world. The core is that the country urgently needs to interact with M-Pesa.

Mobile money services have facilitated a large number of transactions in almost every sector of the Kenyan economy. According to the Kenya National Bureau of Statistics (KNBS), a government agency that collects, analyzes and disseminates data, more than 90% of the adult population in the country owns M-Pesa e-wallets.

On the surface, this kind of contact with mobile banking seems to be the ideal environment for cryptocurrency. It was true, but unfortunately, it was offset by another force.

If the people who run it do not see M-Pesa as a competitor, then M-Pesa may be an important ally of cryptocurrency, so it should not be allowed to grow. It was M-Pesa, not the regulator, that killed the first two local Bitcoin exchanges on the African continent.

In 2013, Danish computer programmer Pelle Braendgaard moved to Kenya with a huge dream, combining two fintech technologies that fascinated him at the time; M-Pesa and Bitcoin. In collaboration with others he met in Nairobi, they launched Kipochi, a wallet and exchange that can make the conversion between Bitcoin and M-Pesa fast, safe and convenient.

However, within a year, they had to shut down Kipochi after Safaricom, the telecom company behind M-Pesa, pushed their payment processor KopoKopo to stop service. Although the regulator temporarily approved Kipochi, it cannot continue to operate without access to the M-Pesa platform.

Pelle Braendgaard, recently Bitker Interview, Claiming that the order to deny them access to M-Pesa came from London. Safaricom is part of the UK-based Vodafone Group.

Two years later, after Kipochi ceased operations, another local exchange, Bitpesa, had to move its business out of Kenya for the same reason. They are denied access to the M-Pesa platformToday, Bitpesa’s core markets are Ghana and Nigeria.

The closure of these two exchanges illustrates the impact of mobile money services on Kenya’s financial industry.

In most countries/regions around the world, access to banking services, especially centralized exchanges operated by companies, is critical to their survival. In Kenya, it can access the mobile money platform M-Pesa.

Even after the exchange withdrew from Kenya, despite the hostility, M-Pesa remained the main means of conversion between cryptocurrency and fiat currency. Today, transactions in and out of M-Pesa are conducted through peer-to-peer exchanges, especially Localbitcoins, Paxful, and Binance.

At the same time, Kenya remains an important cryptocurrency market on the African continent. According to the research of Localbitcoins, It ranks third Second only to Nigeria and South Africa.

It should be pointed out that although M-Pesa is the main way to buy and sell cryptocurrencies, it has other restrictions. In particular, the daily transaction volume cannot exceed 3000 US dollars, and the transaction volume cannot exceed 1500 US dollars.

In addition, using peer-to-peer exchanges to trade with M-Pesa can be troublesome in several other ways. For example, this is not a smooth process, especially when you have to actively search for and pick the best offer from a list of online traders. Usually, the person you contact will reject your business for some reason, and you must continue to look for it. This is time-consuming and inconvenient.

There is also a risk of being deceived. Although the peer-to-peer trading platform has implemented various security features, crooks are still looking for ways to deceive and steal real traders.

Using bank transfer seems to be an obvious choice. In fact, many transactions on Localbitcoins, Paxful and Binance are settled by bank transfer. However, Kenyans mostly use bank transfers for transactions involving amounts that cannot be traded on M-Pesa (more than US$1,500).

But more importantly, today’s Kenyan banks will block any transactions they believe are related to encryption.

Michael Kimani, blockchain consultant, Contributors to CoindeskAs one of the earliest propagators of encryption technology in Kenya, he believes that the bank attaches great importance to the warning issued by the Central Bank of Kenya in 2015 on the use of Bitcoin.

“Commercial banks are not actively looking for crypto transactions related to tokens, blacklists or blocks,” he said, “but if it is obvious to them that you are sending money to buy cryptocurrency or the funds received are from crypto transactions, then They have no choice but to mark transactions. They don’t want to get into trouble with the central bank.”

Michael said that he had several problems depositing money into his account because the bank noticed that the payment came from an encrypted entity.

Kenyans began to explore encrypted funds debit cards. This service is convenient, especially when people just want to convert their holdings into legal tender so that they can use it.

It works by registering a provider of such financial services to issue you a Visa or MasterCard brand debit card. To use it for shopping or withdrawing money at an ATM, you need to provide a certain amount of cryptocurrency in the wallet associated with your account.

Every time you buy or withdraw money from an ATM, the equivalent amount of cryptocurrency is automatically converted into legal tender based on the current market exchange rate.

With this debit card, Kenyans can use their cryptocurrency without going through M-Pesa. They do not need to try opportunities with the bank, hoping that they will not be caught. Instead, they can walk into any store that accepts debit card payments and shopping.

Recently, I started experimenting with a debit card funded by cryptocurrency to see how it works in Kenya. Unfortunately, few companies are interested in offering this product to the African market. Binance is one of the most commonly used exchanges by Kenyans and Africans. It has a Visa debit card, but Kenyans cannot use it yet.

In Africa, the Binance debit card service has been opened to users in South Africa and Nigeria. However, for some unclear reasons, as of this writing, the service has been temporarily disabled in two countries.

Doing some research on the Internet, I came across a project called Club swan, A club that provides various financial services to its members, including the use of cryptocurrency through debit cards. I applied for their debit card.

The Club Swan card appears to be treated as any other debit card issued by a local or foreign company associated with Visa or MasterCard.

In my next article, I will describe my experience using cryptocurrency debit cards in Kenya.

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