A guest post by @KaranjaJohn
Bitcoin in Kenya has generated a lot of controversy with the Central Bank of Kenya issuing a public notice warning against the use of bitcoin as a currency within the country. While currency regulation and monetary policy is within the purview of the Central Bank, it is important to dig deeper into what could be the most revolutionary technology of our age and how best we can we move forward with ensuring Kenya and indeed the African continent exploits fully the opportunity that is now within our grasp.
Make no mistake, bitcoin and its underlying blockchain technology will disrupt the current financial order that currently has banking institutions sitting at the top of the food chain. Incumbents who fail to understand and implement strategies risk becoming irrelevant akin to the manner in which Kodak became irrelevant by the advent of Digital Cameras. Indeed Kenyan Banks have already had a taste of this with the arrival of M-Pesa, the mobile money platform, that revolutionized the way Kenyans transfer money and pay for services within the country – amounting to approximately 40% of Kenya’s GDP.
Once again banks and other financial institutions will need to evolve. Bitcoin the world’s first decentralized digital currency is quickly positioning itself as the internet of money; a platform that will allow for instantaneous, immutable and secure exchange of value almost for free and at any given time.
It is important to note that bitcoin the currency is the first successful application of bitcoin the platform. Indeed, the world over, speculators have been the early adopters of this technology, with cases of millions of dollars’ worth of the crypto-currency lost to hacked exchanges across the globe. African Regulators should take time to assess the potential of blockchain technology to reduce costs and enhance transparency within multiple sectors of the economy. For example blockchain technology could eventually provide mechanisms to seal corruption loopholes and track illegal activity such as money laundering at very low costs. Indeed The Central Bank has a constitutional role to manage the country’s fiscal and monetary policy and as such regulating entities such as exchanges that utilize bitcoin the currency is well within their role. This is important to enhance safeguards that ensure consumer protection, prevents money laundering, and monitor transactions for any terrorist activity. This can be done without stifling the technological potential of bitcoin the protocol that is already self-regulating and trust-less.
Blockchain technology has in the recent past become quite popular with banks and financial institutions seeking a way to decentralize storage of information away from traditional databases like the dominant SQL technology. Indeed a number of banks in the United States have formed a Consortium called R3 CEV that intends to develop its own intra-bank blockchain protocol for secure settlement of money transfers between themselves. The World Economic Forum in Davos recently hailed blockchain technology as a revolutionary platform that will dis-intermediate costs associated with middlemen in the remittance space, saving the consumer billions in transfer and other associated costs.
Furthermore blockchain technology will also be critical in addressing corruption in the land sector. Issues such as duplication of title deeds as well as unlawful transfer of land properties will become difficult if not impossible should a public distributed ledger be used to permanently record these transactions. Existing centralized systems allow intermediaries to tamper with records as their databases can be corrupted quite easily.
In conclusion, bitcoin and its underlying blockchain technology offer huge promise in solving many problems across Africa by creating trustless systems that remove the power from centralized intermediaries that could otherwise be corrupted or influenced by power. These technologies can be deployed across many sectors to reduce costs and enhance efficiency. People should not look at bitcoin as a currency alone as that is really only its first application similar to the manner in which email was the first pervasive application of the Internet, which has since developed to include other applications such as web, mobile and even social media applications. Bitcoin and other blockchain applications are creating an Internet of Value where individuals will become even more empowered. Prudent regulation that protects consumers by ensuring third parties that build solutions on top of this technology do not act unfairly is needed. Kenya and Africa, once again have the opportunity to lead World in utilizing innovative and disruptive blockchain technologies such as bitcoin.
John Karanja is the Founder of BitHub Africa a Blockchain Accelerator providing Consultancy and Incubation services for individuals and firms interested in Bitcoin and Blockchain Technology.