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Limited awareness among Kenyans about the potential of cryptocurrencies is a significant barrier to its adoption in the country.
While the global cryptocurrency landscape continues to evolve rapidly, Kenya's uptake remains hindered by skepticism, misinformation, and a lack of clear understanding.
Cryptocurrencies such as bitcoin have seen their prices surge after Donald Trump - a strong backer of cryptos - was elected US president.
Bitcoin traded at average $94,920 (Sh12.3 million) on Monday.
Speaking in Nairobi, Florence Githinji, the regional marketing manager for Yellow Card in East Africa, stated the untapped potential of cryptocurrencies to revolutionize financial transactions, particularly cross-border payments and investments.
“Many people do not even know how to get started. If you want to send money to someone in Nigeria or get paid for remote work from the US, crypto offers an alternative. Yet most people remain unaware of these possibilities.
"There is limited awareness in terms of the options that are not your banks or your mobile money providers,” Githinji said.
This evolution, she explained, is fuelled by high mobile penetration in the country, a youthful population, and widespread internet access, which collectively drive innovation in the financial technology space.
"Kenya’s crypto space is growing very fast and evolving just as rapidly, a few years ago, Bitcoin dominated the market and conversations. But now in 2024, stablecoins are taking the lead, showcasing how quickly the ecosystem can change," said Githinji.
Traditional banking systems, she said, often exclude large segments of the population, especially those without a stable income or access to formal employment.
Githinji acknowledged that early scams had tarnished the reputation of cryptocurrencies, making people sceptical, a trust deficit that pushed people away from the crypto space.
“Many people hear horror stories of individuals losing money and immediately label crypto a scam. It’s a tough perception to change,” she said.
Last year, the Central Bank of Kenya (CBK) indicated caution towards cryptocurrencies, citing global market instability as a major concern.
In March last year, two major US banks- Silicon Valley Bank and Signature Bank, collapsed amplifying fears about the volatility of crypto assets.
Signature Bank, which had significant crypto deposits, faced fallout from the collapse of the FTX exchange.
“This volatility has led to investor caution and reduced interests in crypto assets. It has also highlighted key liquidity issues faced by cryptocurrency firms, exacerbated by poor governance frameworks,” said CBK in a policy document in April 2023.
The incidents had ripple effects globally, including in the country. The CBK shelved plans to develop a Central Bank Digital Currency (CBDC), stating that while digital currencies could enhance financial stability and ease cross-border money transfers, the risks outweighed the benefits.
“Recent instability in the global crypto assets market has amplified concerns and the need for a careful review of the innovation and technology risks,” the CBK stated.
Githinji acknowledged that crypto investments come with risks and require informed decision-making.
The lack of clear regulations in the country has also been a stumbling block for the crypto industry. Githinji acknowledged that the government stance significantly influences public perception.
“A single statement from the authorities cautioning against crypto can undo years of progress,” she said.
Although Kenya has taken steps to regulate the sector, with the digital asset tax introduced in the Finance Bill 2023 already in place, the absence of comprehensive guidelines leaves room for skepticism.
The Kenya Revenue Authority (KRA) has intensified efforts to tax digital coin traders, targeting Shs.60 billion in collections from the sector.
Globally, the cryptocurrency industry is at a crossroads. In the US, President elect Donald Trump has pledged to support the sector with executive orders aimed at mainstreaming cryptocurrencies.
A report by the United Nations Conference on Trade and Development (UNCTAD) indicates that 4.2 million Kenyans hold cryptocurrencies, the largest population in Africa.
Despite this, the CBK remains cautious, warning about risks such as financial exclusion and potential conflicts of interest if it were to act as both a regulator and issuer of a digital currency.
“Customers would perceive CBDC as risk-free and convert their deposits to CBDC. This would in turn stress bank deposits, threaten financial stability, and adversely impact monetary policy transmission due to an increase in central bank issued money, and a reduction in deposits held by banks,” CBK noted in its statement last year.
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