What is Bitcoin? – A puzzling question posed by everyone coming across Bitcoin for the first time. The Bitcoin Kenya Meet up group regularly convenes at the iHub for monthly open discussions on this subject. The discussion on November 5 was ‘BitLegal Status Around the World’ – a cursory look at what regulators and government authorities all over have to say about new forms of digital currency. It is important as it defines a domain for regulators in East Africa. Interestingly, regulators just like regular folks, have trouble wrapping their head around ‘What is Bitcoin?’ Writes a Guest Blogger Michael Kimani on iHub
IMO, Bitcoin is what Nassim Taleb – a scholar, refers to as a black swan–
“An event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit.
Bitcoin is one of the most important breakthroughs of the digital age since the internet! Bitcoin is a global secure layer on top of the internet with online payment capabilities. Just to get a clear picture of how immense it is, this brief 4min video will get you up to speed.
Bitcoin is a platform with a long list of possible applications built on top of it. One of these apps, is bitcoin, the currency. These features make it a unique global payment network that anyone can take part in. It is a currency, asset, platform, decentralized network – all wrapped into one burrito.
Understandably, government agencies and financial regulators find it difficult to demarcate a regulatory framework for innovative digital currencies such as Bitcoin. Largely, it has been a net positive; a mixed bag of official statements falling on the‘Wait and See’ approach, early guidance on its use, adoption and Bitcoin start-ups. A couple have out rightly banned its use – Iceland and Ecuador in favour of their own digital currency.
Digital Currency Regulation in Kenya – Lessons from Mpesa
In a lot of ways, the ongoing debate on Bitcoin regulation in the rest of the world is surprisingly similar to that of MPESA in its infancy stage (Pre- 2008). Mpesa, just like Bitcoin was a unique innovation that did not fall within existing regulatory framework during the time. A case study report by the AFI [Enabling Mobile Money Transfer – CBKs treatment of Mpesa] pdf here, details the early regulatory considerations of Mpesa involving multiple stakeholders – GoK, National Assembly, Safaricom, Central Bank of Kenya, Banks and the Kenyan public.
In retrospect, we can all agree it was wise to foster Mpesa. Because it remedied an immediate financial inclusion challenge, letting it grow into its potential was crucial all the while adhering to money laundering and money transfer regulations. Was it a bank? Was it a payment network? Did it fall under the law?
Eventually, the ability of this innovation to radically offer access to financial services by the unbanked tipped the scale and won it for Mpesa. A watershed that has defined Kenya in more ways than we can quantify. The Central bank of Kenya commendably handled it well, recognizing the best way to tap into the mobile phone as a money transfer tool.
Bitcoin regulation around the world
Thiswiki is a comprehensive start for a full list of what regulators’ guidance in different countries, albeit several months old has been.
Bitcoin and digital currencies have a place in connecting Kenya and East Africa to the global market and commerce. Mpesa has worked well for money transfers within the country – Bitcoin and digital currencies complement that by making global payments faster, cheaper and straight into/from your phone! The internet made it possible for all of us to take part in a global economy, Bitcoin enhances global value exchange as cash for the internet!
Finally, if you couldn’t make it for our meet up, you can view the slides here. We are having our next meet up on the 1st of December on ‘Buying, Selling, Trading and Securing Bitcoins’ at the iHub. See the event detailshere. For questions and info, email us firstname.lastname@example.org myself email@example.com.
About the Author:Michael Kimani is the Lead Coordinator at the ADCA @African_DCA www.africandca.org Based in Nairobi, Kimani advocates bitcoin & digital currencies in East Africa. He also regularly writes on digital finance, electronic payments and digital currencies in East Africa on @pesa_Africa.