NAIROBI, Kenya, Nov 14 – Central Bank Governor Dr. Patrick Njoroge has said the regulator is still assessing the risks associated with cryptocurrencies such as Bitcoin before rushing to regulate the digital currencies that have taken the financial world by storm.
Speaking at the Global Financial Forum in Dubai, Njoroge has said the Central Bank is open to innovations that are guided by the right regulations.
Njoroge has told the delegates that new technologies and financial inclusion have led to a complete transformation of how Kenyans engage with financial services.
As an illustration of the digital shift in the banking sector, Njoroge has revealed that in his two years as the Central Bank Governor, he has not stepped into a banking hall to carry out a transaction.
“If you’re the regulator, you have to be careful that all risks are taken care of, including in cryptocurrencies, but we’re very open to innovation,” said Njoroge in a session on Financial Reforms in Emerging Markets.
CBK’s cautious approach is shared with the U.S. Secretary of the Treasury Steven Mnuchin who has said the US government is carefully assessing how bitcoin is being used especially for illicit and illegal web activities.
Bitcoin allows users, among other capabilities, to exchange the virtual currency with other currencies with one bitcoin now trading at an all-time high of 6,583 US dollars.
In 2016, the CBK had issued a statement warning against the use of Bitcoin because it is not issued or guaranteed by any government or central bank.
The regulator was weighing in following a court battle between Safaricom and Bitcoin Remittances Company based in Kenya, BitPesa, where the telco blocked the Bitcoin trader from using its platform for transactions.
In an interview with Capital Business, BitPesa Chief Executive Officer Elizabeth Rossiello says an earlier letter from the CBK to BitPesa indicated the digital currency business model did not need a license, “and was outside their licensing structure.”
“We are no different than the many other businesses that use Paybill and other Merchant Accounts at mobile money and have been unfairly targeted since the beginning. We believe it is because there is a lack of understanding about the technology we use and an unfounded fear that blockchain technology will “kill” mobile money – it will not – it will be a great companion,” said Rossiello.
Unlike most digital currencies, Bitcoin and other cryptocurrencies, do not have a central administration system.
Instead, transactions are recorded in a public ledger known as blockchain through a networking of communicating points running bitcoin software.
Rossiello says the digital currency system it has set up in Kenya and Nigeria has allowed small businesses make and receive payments across the continent, in a convenient, fast and at low cost.