On September 6th 2018, the Institute of Economic Affairs- Kenya (IEA-Kenya) held a public forum on Cryptocurrencies in Kenya. IEA-Kenya is a think tank organization aimed at influencing public policy in Kenya. Some of the topics presented include:
- Fundamentals of cryptos- the risks and and opportunities- the presentation was by Mr John Walubengo who is a member of the National Task Force on Blockchain and Artificial Intelligence in Kenya.
- Digital identity as an integral part of cryptocurrency regulation presented by Djibril Wachiye of Belfrics Kenya Limited
- Opportunities for the financial sector a presentation by one Mr Jared Osoro who is the Director of Research and Policy at the Kenya Bankers Association (KBA).
- Opportunities for mining bitcoins in Kenya which was presented by Joseph Nyagari who is a bitcoin entrepreneur.
Fundamentals of cryptos- the risks and and opportunities
Kenyans interest in bitcoin and cryptocurrencies has continued to grow over the years with many of the local populace being involved in bitcoin trading. Notably a survey carried out on localbitcoins ranks the country as number 23 worldwide on usage of the platform to buy and sell bitcoins.
By 8 am Kenyan time the venue for the public forum was full to capacity despite being a chilly morning and a working day for most of the people just shows the interest growing in this space.
Mr John Walubengo a lecturer and member of Kenya’s dream team (taskforce) tasked with delivering the country’s blockchain technology adoption roadmap examined the fundamentals of cryptocurrencies. Prior to discussing the risks and opportunities of cryptos Mr Walubengo explored how users of money can send it over the internet without depending on third party or centralized intermediaries. It is at this point he argued cryptocurrencies especially bitcoin give us an opportunity to send money over the internet without going through a central or third party. In order to understand bitcoin, he advised it is important for one to study and understand how blockchain works which is among the technologies underlying bitcoin.
Some of the opportunities discussed available within the token ecosystem include creation of internet of value. This creates new approaches to aid local and across border payments and more importantly remittances. Bitcoin is a disruption to conventional payments and remittance systems as with cryptos transactions are instant, not limited to days for one to access own funds or amount to send (one can send any amount with bitcoin) and cost friendly. Cryptos presents developing nations especially in Africa an opportunity to participate in the financial system without restrictions of age, earning levels, nationality skin color among others.
Additionally, Walubengo noted there are mining opportunities for those interested in maintaining blockchain networks and earn a reward in exchange. However, he cautioned against mining of cryptos in Kenya such as bitcoin due to huge investment requirements in terms of finances to purchase hardware required to mine and due to mining difficulty its energy consuming. Further, he was of the view Central banks should not be wary of bitcoin instead invest in research on how to use blockchain technology to solve some of challenges faced by the banks for instance implement blockchain based funds transfer. At this point he mentioned there are deliberation Kenya is looking into launching its own cryptocurrency sort of token pegged on fiat currency to aid with management of financial data and records between the central bank and retail banks to streamline operations.
Another token opportunity is taking advantage of the token economy. This entails using tokens or cryptos to influence human behavior. Mr Walubengo gave an example in the context of Kenya where more efficiency and transparency can be achieved in the government program currently sending cash to senior citizens monthly. There are many questions around this program which raise issues such as does the cash get to real senior citizens and how is the money spent. In this case, the government can use redeemable tokens sent to the citizens and redeemable at specified service providers instead of sending cash.
Finally, he talked of Initial Coin Offerings (ICOs) as an opportunity for businesses especially start-ups can use the new model to raise funds worldwide to fund their projects.
On the other hand, Mr Walubengo noted there are risks associated with cryptocurencies including facilitation of money laundering, terrorism due to anonymity possible with cryptos. He also advised due to the unregulated nature of this space it is important for individuals to conduct due diligence to avoid being victims of fake cryptocurrencies, exchanges and most significantly scam ICOs.
Digital identity as an integral part of cryptocurrency regulation
Belfrics has developed a blockchain solution aimed at disrupting the identity management process thus empowering businesses and individuals by having a KYC system that is cost effective and secure to use that makes a user in control of own data. Djibril Wachiye who works with the Belfics Kenya Limited explained the role Belrium blockchain will play in the cryptocurrency space especially with its introduction of digital identity to crypto transaction in a bid to improve transparency and security. Djibril also hinted Belfrics is in the process of liaising with local universities to kick-start learning of blockchain and digital currency courses in Kenya.
Opportunities for the financial sector
Mr Jared Osoro spoke of cryptocurrency opportunities for the financial industry in Kenya. He started by observing conventional payment systems locally are controlled by the central bank of Kenya and when involved in international transfers there are at least two banks involved in different geographical locations. Major feature of payments systems as it is now transactions may take a day or even several days. Further, Mr Osoro explained even though modern stock markets have almost instant transactions the clearance process may take 2 to 3 days due to additional parties involved in the entire process. The advent of bitcoin and blockchain technology allows users and providers of financial services to save time on clearance as transactions with cryptocurrencies are instant and reduces settlement risks involved in conventional financial sector.
Furthermore, use of blockchain aids bank’s transparency in transactions involving transfer of property such a transaction is recorded in a digital ledger that is unforgeable, thus not possible to alter proof of ownership illegally.
Opportunities for mining bitcoins in Kenya
Bitcoin mining was an interesting topic as almost everyone in the audience just like everyone else in this space wants to invest or at least own some bitcoins. Joseph Nyagari & Eric Michubu who are bitcoin entrepreneurs introduced the audience to the concept of bitcoin mining. Essentially, bitcoin mining involves use of special software and hardware by individuals, groups or companies to solve mathematical problems and the people doing this known as bitcoin miners are issued with a number of bitcoins in exchange. Mr. Joseph Nyagari took the audience through this concept of bitcoin mining and some of the hardwares used such as the AntMiner S9. The audience was awed to have a look at real time bitcoin mining process using sites such as Smartbit and blockchain.info among others. Some of the interesting facts learnt during this presentation is time taken by bitcoin miners to produce a block, number of bitcoins sent in the last 24 hours.
The pools such as ViaBTC, BTC.com and BitClub Network involved in adding new realized block to the network and mining rewards for each participating bitcoin miner. Noteworthy, with the audience interest in bitcoin mining and claim ownership of Bitcoins a word of caution was put out of the huge costs and resource intensive requirements to start bitcoin mining. More so, even if one imports the hardware it may not be profitable enough to start bitcoin mining in Kenya also considering the cost of electricity. However, they can be join mining pools such as BitClub Network which recruits members locally.
In a span of 3 hours from 9 am Kenyan time to 11:30 the public forum on cryptocurrencies in Kenya was wound up. However, it was apparent from the presentations and indulgence of the audience cryptocurrencies more so, the blockchain technology is here to stay. Therefore, people should continue engaging in such forums and Kenya was at the right spot to start appreciating cryptocurrencies as well as look out for possible application areas of this emergent technology to its advantage.