Many think that it is easier for Kenyans to accept crypto because of M-Pesa. But unfortunately it turns out to be the other way around.
When it comes to adopting crypto, Kenya is a unique market in Africa and the rest of the world. At the center is the overwhelming need in the country to connect with M-Pesa.
The mobile money service facilitates the majority of transactions in almost all sectors of the Kenyan economy. According to the Kenya National Bureau of Statistics (KNBS), the government agency that collects, analyzes, and disseminates data, over 90% of the country’s adult population own an M-Pesa e-wallet.
At first glance, this public exposure to mobile banking appears to be the ideal environment for cryptocurrencies. It is true, but unfortunately it is offset by another force.
M-Pesa could have been a great ally of crypto if operators hadn’t seen it as a competitor and therefore shouldn’t have been empowered to grow. It is M-Pesa, and not the regulator, that killed the first two domestic bitcoin exchanges on the African continent.
In 2013, Pelle Braendgaard, a Danish computer programmer, moved to Kenya with the big dream of combining two fintech technologies that fascinated him at the time. M-Pesa and Bitcoin. Working with others he met in Nairobi, they launched Kipochi, a wallet and exchange that could make converting between Bitcoin and M-Pesa quick, safe and convenient.
However, they had to shut down Kipochi within a year after Safaricom, the telecommunications company behind M-Pesa, urged their payment processor KopoKopo to shut down. Although the regulator had given Kipochi the green light for the time being, it could no longer operate without access to the M-Pesa platform.
Pelle Braendgaard has claimed in a recent interview with BitKe that the order to deny them access to M-Pesa came from London. Safaricom is part of the Vodafone Group, headquartered in the UK.
Two years later, after Kipochi shut down, another local exchange, Bitpesa, had to relocate operations out of Kenya for the same reasons. They were denied access to the M-Pesa platform. Today, Bitpesa’s core markets are Ghana and Nigeria.
The closure of these two exchanges shows how much impact mobile money services are having on Kenya’s financial sector.
In most countries around the world, access to banking services, especially to centralized exchanges operated by corporations, is vital. In Kenya, she has access to the M-Pesa mobile money platform.
Even after the Kenya exchanges exit and despite its hostility, M-Pesa remains the primary vehicle for converting between crypto and fiat. Today, trading in and out of M-Pesa takes place via peer-to-peer exchanges, especially Localbitcoins, Paxful and Binance.
Meanwhile, Kenya remains a major crypto market in the African continent. According to research by Localbitcoins, it ranks third behind Nigeria and South Africa.
It’s important to note that while M-Pesa is the primary method of buying and selling crypto, it comes with other limitations. Specifically, you cannot process more than $ 3,000 in a day and a transaction cannot exceed $ 1,500.
Using peer-to-peer exchanges to transact with M-Pesa can also be cumbersome in a number of other ways. For example, it’s not a smooth process, especially when you have to actively search online and choose the best deals from a list of retailers. Often times, those you turn to will turn down your business for one reason or another and you will have to look further. This is time-consuming and far from convenient.
There is also a risk of being scammed. Although the peer-to-peer trading platforms have introduced various security features, scammers are still finding ways to trick and steal real traders.
Using bank transfers seems like an obvious option. In fact, many of the transactions on Localbitcoins, Paxful, and Binance are processed via bank transfer. However, Kenyans mainly use wire transfers for transactions with amounts that cannot be processed on M-Pesa (over $ 1500).
But more importantly, Kenyan banks today are blocking any transaction they believe is crypto-related.
Michael Kimani, a blockchain consultant, an employee of Coindesk and one of the first Kenyan crypto evangelists, believes banks are taking very seriously a warning from the Kenyan central bank, the regulator that issued 2015 on bitcoin usage.
“Commercial banks don’t actively look for flag, blacklist, or block related crypto-related transactions,” he says, “but when it’s so obvious to them that you are sending money to buy crypto, or the funds that are If they come from a crypto transaction, they have no choice but to mark the transaction. You don’t want to get into trouble with the central bank. “
Michael says he had problems getting payments into his account a few times because the bank noticed that the payment was coming from a crypto unit.
Kenyans are starting to explore crypto-funded debit cards. This service comes in handy, especially if you just want to convert your property into fiat so that he can spend it.
The way it works is that a provider registered for this type of financial service will issue you with a Visa or MasterCard branded debit card. To use it for shopping or ATM withdrawals, you need to provide a crypto amount in a wallet linked to your account with them.
Every time you make a purchase or withdraw from an ATM, an appropriate amount of crypto is automatically converted into fiat based on the prevailing market rates.
With this debit card, a Kenyan does not have to go through M-Pesa to spend his crypto. You also don’t have to try your chances at the bank hoping not to get caught. Instead, they can just go to any store that accepts debit cards for payments and shop.
I recently tried a crypto-funded debit card and saw how it works in Kenya. Unfortunately, only a few companies were interested in offering this product to the African market. Binance, one of the most widely used exchanges by Kenyans and Africans, has a Visa debit card, but it’s not yet available to Kenyans.
In Africa, Binance’s debit card service is available to users in South Africa and Nigeria. However, for unclear reasons, the service was temporarily disabled in both countries at the time of this writing.
While doing research online, I came across a facility called Club Swan, a club that offers various financial services to its members, including using crypto through their debit cards. I applied for your debit card.
Club Swan’s card is treated like any other debit card issued by a local or overseas company affiliated with Visa or MasterCard.
In my next post I will describe my experience with the crypto-financed debit card in Kenya.