Kenya should move to an entirely tokenised system and drop fiat cash all together, says the chairman of the country’s blockchain taskforce.
Dr Bitange Ndemo, a University of Nairobi associate professor who leads the group and is a strong advocate for emerging technologies, told local newspaper the Star: “We must begin to tokenise the economy by giving incentives to young people to do things which they are paid through tokens that can be converted to fiat currency.”
“Tokens are like points given by mobile operators or loyalty points given at the supermarket, they can be converted to coins and used to buy goods of your choice.”
Ndemo got his doctorate in industrial economics from the University of Sheffield, UK, and has an MBA from St Thomas, Minnesota, and was former permanent secretary in the Ministry of Information and Communications before quitting politics for academia.
His 11-member “tech dream team” was set up in March 2018 to study the applications of blockchain for fintech and beyond.
The ideal for Ndemo would be that the central bank follow blockchain advocates around the world and move to put a digital version of the Kenyan shilling in place.
Everyone from Kenyan freelancers working and being paid online, to those sending money to family in Kenya or paying overseas school and university fees would benefit, he believes. It would mean the end of paper cash and coins, and a move to an entirely digital currency.
In July his taskforce promoted the idea of a central bank digital currency – the kind being researched by the Bank of England, in Thailand with Project Inathon, and in cryptocurrency-unfriendly India.
But appetite from an entrenched and slow-moving Kenyan government has to be given time to catch up to reality. Pro-crypto activists face an uphill struggle convincing financial regulators.
Decisions have been repeatedly shelved since July 2018, when Parliament gave the Treasury a two week deadline to come up with a firm stance on cryptocurrency regulation. Worse, the governor of the Central Bank of Kenya, Dr Patrick Njoroge, is ideologically opposed to cryptocurrrencies, according to advocacy group the Blockchain Association of Kenya.
In an opinion piece, they write: “He issued two damning public notices warning the public to stay away from cryptocurrencies, and a circular expressly requesting banks to choke any value out of transfer activity relating to cryptocurrencies.”
A 2015 court case between payments provider Safaricom – which is 35% owned by the government – and blockchain-powered remittance startup Bitpesa forced the central bank to clarify its position.
After the Kenyan High Court heard the dispute, the bank issued a December 2015 public notice warning investors to stay away from Bitcoin and altcoins.
It says: “No entity is currently licensed to offer money remittance services and products in Kenya using virtual currency such as Bitcoin. This is to inform the public that virtual currencies such as Bitcoin are not legal tender in Kenya [nor are they regulated] and therefore no protection exists in the event that the platform that exchanges or holds the virtual currency fails or goes out of business. The public should therefore desist from transacting in Bitcoin and similar products.”
The Blockchain and AI taskforce is a sign things are on the move in Kenya. But we may see the common approach that comes up with risk-averse regulators across the globe: blockchain good, Bitcoin bad.
However, there is some evidence that regulators are willing to soften their stance. In the first quarter of 2018, a group of cross-industry regulators from the insurance, capital markets and pension sectors met to discuss cutting-edge advances in fintech, including cryptocurrencies.
Cryptocurrency trading remains extremely popular among the public, with analysts estimating that volumes transacted in Kenya are the third highest on the continent, behind South Africa and Nigeria.
At the same time, government appetite for blockchain products is on the rise in Kenya.
The central bank was one of 75 to sign up to JP Morgan’s Quorum blockchain cross-border payments project, the Interbank Information Network.
With this in mind, the cynic might say that it is a simple matter of changing the language around cryptocurrency products that will allow the central bank and finance ministers to get fully behind a tokenised economy.