Following bitcoin’s birth in 2009 as a decentralized peer-to-peer payment network with fast transaction speeds and low transaction fees, one of its most predicted future application uses was for international remittance purposes. Many experts envisioned that bitcoin would be a driving force in reducing the costs of international money transfers to developing regions such as Sub-Saharan Africa and, thereby, create more financial inclusion for the unbanked.
While anticipated bitcoin remittances into Africa have still not taken off at a large scale, Africa has birthed several local Bitcoin economies spread across the continent.
In this article, you will be introduced to the state of bitcoin in Kenya to give you an insight into East Africa’s leading bitcoin hub.
Kenya’s Bitcoin Ecosystem
Kenya is among the four main Bitcoin economies in Africa next to South Africa, Nigeria, and Ghana. While bitcoin awareness and adoption are growing in many parts of Africa, only the countries mentioned above offer Bitcoin ecosystems that include startups, meetups, a local Bitcoin community, and bitcoin liquidity.
Kenya is the home to several bitcoin startups, regular bitcoin meetups, a blockchain-focused coworking space and accelerator; a population used to making mobile payments, and an increasing demand for bitcoin according to.
You cannot talk about Bitcoin in Kenya without mentioning Kenya’s bitcoin startup poster child. BitPesa was launched in 2013 with the aim to provide individuals and business with the opportunity to make low-cost international money transfers to and from Sub-Saharan Africa by leveraging the cryptocurrency bitcoin.
BitPesa has so far managed to raise over $6 million from leading blockchain-focused venture capital firms, including Blockchain Capital, Draper Associates, Digital Currency Group, and BitFury Capital, to grow its business and expands into new markets. BitPesa currently operates in Kenya, Uganda, Tanzania, Nigeria, Democratic Republic of Congo, Senegal as well as the UK and can process cross-border payments in over 30 currencies.
When BitPesa first started out, it focused on remittances for private individuals but has since changed its business model to focus primarily on B2B cross-border transactions. This decision was partly a result of BitPesa’s quarrel with Kenya’s leading telecoms company Safaricom, which switched off BitPesa’s access to its mobile money platform MPesa that it was using to turn bitcoin remittances into fiat currency for everyday users. BitPesa went to court against Safaricom to regain access to its mobile money platform but lost the case.
Nonetheless, through refocusing its business on B2B cross-border payments and by expanding into other regions in Africa, the BitPesa success story continues, and its recent $2.5 million funding round from January 2017 is a testament to that.
The Central Bank’s View on Bitcoin
Following the BitPesa vs. Safaricom court case in December 2015, the Central Bank of Kenya (CBK) issued a publicto inform the public. The notice stated:
“virtual currencies such as bitcoin are not legal tender in Kenya and therefore no legal protection exists in the event that the platform that exchanges or hold the virtual currency fails or goes out of business…”
The CBK also suggests that the anonymous aspect of bitcoin transactions make them, “…susceptible to abuse by criminals in money laundering and terrorism financing.”
Since then, the Kenyan central bank has issued no official guidelines or public clarification on the use of bitcoin and other digital currencies.
At a meetup in Nairobi in summer of 2016, a leading member of Kenya’s Bitcoin community stated that the Kenyan Central Bank had informed local banks not to conduct business with bitcoin startups., making it very challenging for new bitcoin startups to open company bank accounts in Kenya.
Kenya’s Blockchain-focused Coworking Space and Incubator
In 2016, BitHub.Africa launched East Africa’s first bitcoin and blockchain-focused coworking space and startup incubator in Kenya’s capital, Nairobi.
Former BitPesa employee John Karanja founded BitHub.Africa in 2015 with the aim to become a center of excellence for blockchain technologies in Africa. BitHub.Africa offers two coworking spaces, an incubator for startups that are looking into developing blockchain-based solutions, and consultancy services for companies interested in learning more about blockchain technology.
Silicon Savannah Creates Promising Breeding Ground for Bitcoin, but Progress is Slow
The biggest hindrance for bitcoin adoption in Africa is the low level of internet penetration. Currently,, but internet connectivity is mainly found in the major cities and is clustered across a few of Africa’s larger economies.
Kenya has the highest internet penetration,, in Africa and is also one of the two leading Sub-Saharan countries in internet and telecommunication development next to South Africa. Consequently, the capital Nairobi has turned into a hub for tech startups, dubbed as Silicon Savannah. Furthermore, Kenya is leading Africa in mobile payment adoption with 86 percent of households having mobile money accounts according to .
While these factors bode for a good breeding ground for bitcoin startups, only a few entrepreneurs are currently leveraging blockchain technology to develop solutions in Kenya. Aside from BitPesa and Bithub.Africa, other Kenyan blockchain startups include Remitano and Umati Blockchain.
Regarding merchant adoption, there is little to none in Kenya. According to CoinMap, a platform that collates and lists merchants that accept bitcoin, there are currently only seven vendors accepting bitcoin payments. Two travel agents, two tech companies, and three e-commerce stores.
Talking to several members of Nairobi’s Bitcoin community, they say that the main people using bitcoin are the young tech-savvy generation that is either receiving bitcoin as payments for freelance work or are buying bitcoin in an attempt to make an investment profit. Private peer-to-peer remittances using the cryptocurrency have not become a common occurrence in Nairobi.
With an unclear regulatory stance on bitcoin and the low level of bitcoin awareness and adoption, foreign blockchain startups are unlikely to enter the Kenyan market anytime soon. Local interest in the cryptocurrency is definitely on the rise, but like everything in this part of the world, it will take a little while longer for bitcoin to become a “thing” in Kenya.