LETTERS: Kenya requires digital currency policy
Despite Kenya positioning itself as the regional financial hub, money remittance systems, and modern payment firms setting shops in Nairobi, Kenya has remained a cash-driven economy.
All the payment solutions from card-based, mobile money platforms to online have only managed to grab a paltry 15 per cent market share.
The evolution of financial sector is still on and the latest entrance of blockchain cryptocurrencies seems to be the new front. Barely a decade old since it was invented by Satoshi Nakamoto, the anonymous character behind bitcoins, the most famous cryptocurrency, the push seem to be unstoppable.
It seems that developed countries have moved forward to accept it as an alternative means of payment even though it is unregulated since the settlements are Internet-based and operating within no closed jurisdiction.
Locally, the Central Bank has only warned that cryptocurrencies are red herrings of present day pyramid schemes.
The momentum of bitcoins seems to have gained an upward trajectory for the last 15 months and not until a few days ago when ICT minister appointed an advisory committee. The government has been at a crossroads since the digital currency is not a commodity you can outlaw.
Like any other innovation, cryptocurrencies have brought in with them both opportunities and challenges. On the one hand, they offer a raft of advantages.
Immediate cross border settlements of transactions unlike the other hard currencies which may take several days as they go through the correspondence and intermediaries’ chain. Other benefits are easily accessible to anybody with internet access unlike currencies that operate within defined individual country regulations.
On their flipside, they present a number of challenges which if not properly managed, they pose real challenges. First, due to lack of a framework to regulate them, they become vulnerable to international criminal syndicates as a smooth method of transaction. In the absence of a common cross-border regulatory framework it becomes impossible for a single country like Kenya to issue an effective framework.
Secondly, their anonymous mode of operation makes it a haven for scammers and money launderers. Only last year, major parts of the world came under the WannaCry cyber-attack that was locking computers and systems.
Victims which included governments were forced to pay ransom to rescue their data bases else they could be wiped in a minute.
The anonymity of cryptocurrencies starting with Satoshi ensured that there was no trail to the operation powerhouse. This compromises the security features as there is no point of recourse in times of fraud.
For the last 12 months there has been speculation that Internet-based scams have given the currencies a bullish run hitting a record high of $17,000 in January from less than $1,000 a year ago.
As per the latest information, darkwebs have created flourishing of illegal online markets.
The trade on child pornography, pirated software, counterfeits, malwares and system hacks amidst other predicate crimes which fuel money laundering.
The traders use these modern payment solution due to their ease of access, promptness in settlement as well as well as anonymity.
It’s therefore imperative that Kenya does not just sit aloof waiting for the digital revolution to move within our systems.
We need to develop and implement a guideline that will assist in reaping the benefits as well as deter the proliferation of the associated vices.
We also need to ensure that they are not used to fuel money laundering crimes which can act as hinderances to our economic agenda.
Thiongo Irungu, AML officer