Dreams for transacting with cryptocurrencies in Kenya are dwindling as the Central Bank of Kenya (CBK) issues a directive to banks against trading with firms dealing with the form of currency.
According to CBKs governor, Dr. Patrick Njoroge, there are risks associated with cryptocurrency especially on consumer protection, fraud, hacking and loss of data. He says that the cryptos are prone to be used as pyramid schemes.
Speaking to the National Assembly Committee on Finance, Dr. Njoroge also noted that fraud and pyramid schemes are also carried out with fiat currencies such as the Kenyan shilling.
The directive coincides with the mounting excitement following the calls for increased awareness in the Kenyan space given during the World Blockchain Summit held in Nairobi last month.
Not long ago, the blockchain and AI taskforce were unveiled, an indication of a step back in an environment that was beginning to seem technology-oriented.
Cryptocurrencies are anonymous and unregulated hence, they attract terrorists and money laundering activities,” said the CBK boss.
Incidentally, the recent report posits that mobile money is high-risk as a far as terrorism financing is concerned. Still, mobile money services remain unregulated. Moreover, the World Bank Group Senior Vice President Mahmoud Mohieldin termed crypto investing as a gamble during the Euromoney East Africa Conference held this week.
Cryptocurrencies have been the talk for most countries since its inception. The confusion is because of the currency is both a great opportunity and a threat at the same time.
As such, the regulation conundrum is still fumbling with the idea. Daniele Bianchi, an assistant professor of finance, Warwick Business School says that although governments need to put in place efficient regulations that prevent investors getting into difficult situations, the way such regulations are drafted will largely depend on their view of crypto as a useful financial innovation rather than a threat.
The Central Bank of Kenya considering cryptocurrencies a threat may negatively hurt the economy. The regulator is failing to see the opportunity of eliminating financial inclusion barriers through digital currencies while at the same time disregarding the numerous opportunities it could avail.