The Central Bank of Kenya (CBK) has warned that virtual currency is insecure and could fund terrorism, according to the Daily Nation. This comes a day after a court ruled that Safaricom, the nation’s largest cell phone provider, will not have to reinstate access for…
The Central Bank of Kenya (CBK) has warned that virtual currency is insecure and could fund terrorism, according to the Daily Nation. This comes a day after a court ruled that Safaricom, the nation’s largest cell phone provider, will not have to reinstate access for BitPesa, Africa’s largest bitcoin trading platform, to M-Pesa, the mobile payment service.
BitPesa, a bitcoin payments and remittance service which uses the Safaricom telecom, and Lipisha, the payment gateway for both BitPesa and M-Pesa, are suing Safaricom in Kenya, CCN recently reported. Safaricom stopped Lipisha from processing M-Pesa transactions and later reinstated it as long as it terminated its relationship with BitPesa.
The legal disputes could undermine Kenya’s role as a mobile payments success story. The U.S. TV show “60 Minutes” recently reported on the country’s widespread use of M-Pesa called, “The Future Of Money,” describing Kenya as a giant laboratory for defining the future of money.
CBK has now warned that virtual currency can expose people to losses due to the lack of backing of assets.
No entity is licensed to offer remittance services in Kenya using virtual currency such as bitcoin, the CBK said in a public announcement, noting that CBK regulates global and domestic money transfer services in Kenya. Safaricom, the nation’s dominant telecom, denied BitPesa access for not meeting anti-money laundering rules.
The country’s High Court recently announced a preliminary ruling that Safaricom will not have to reinstate BitPesa to the M-Pesa mobile money service.
Safaricom called for the government to license the virtual currency exchanger to connect to its customers.
Elizabeth Rossiello, BitPesa CEO, hailed the recent court ruling. “That Safaricom moved against us shows that we have already won,” she said in a blog. She also noted that the judge found BitPesa is strong enough to sustain its business for the duration of a potentially long trial without access to the M-Pesa network.
Rossiello previously said the case would not concern the bank. She said the bank may or may not make a statement on virtual currency or bitcoin since the case is not about the legality of bitcoin in Kenya. Instead, she said the case is about BitPesa having a strong position against an incumbent competitor.
CBK said it will not protect users should a virtual currency platform fail. The bank said virtual currencies trade on exchanges that are usually unregulated and that users can lose their funds without having any legal redress if the exchange closes. Hence, the public should not trade in bitcoin or similar products.
Featured image from Shutterstock.
Last modified: January 25, 2020 11:10 PM UTC