CBK warns over use of Bitcoin
By James Ratemo, Nairobi, Kenya
Central Bank of Kenya (CBK) has warned Kenyans over use of Bitcoin, a virtual currency gaining popularity across the globe.
Bitcoin is a form of digital currency, created and held electronically. No one controls it.
Bitcoins are not printed, like shillings, dollars or euros – they're produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems.
In a terse statement, CBK said holding and trading of virtual currencies such as Bitcoin in Kenya does not have any legal backing and is open to abuse.
“Bitcoin is a form of un-regulated digital currency that is not issued or guaranteed by any government or central bank. Domestic and international money transfer services in Kenya are regulated by the Central Bank of Kenya Act and other legislation. In this regard, no entity is currently licensed to offer money remittance services and products in Kenya using virtual currency such as Bitcoin,” read the statement in part.
The lender of last resort said virtual currencies such as Bitcoin are not legal tender in Kenya and therefore no protection exists in the event that the platform that exchanges or holds the virtual currency fails or goes out of business.
According to CBK, some of the risks associated with buying, holding or trading virtual currencies include:
- · Transactions in virtual currencies such as bitcoin are largely untraceable and anonymous making them susceptible to abuse by criminals in money laundering and financing of terrorism.
- · Virtual currencies are traded in exchange platforms that tend to be unregulated all over the world. Consumers may therefore lose their money without having any legal redress in the event these exchanges collapse or close business.
- · There is no underlying or backing of assets and the value of virtual currencies is speculative in nature. This may result in high volatility in value of virtual currencies thus exposing users to potential losses.
“CBK reiterates that Bitcoin and similar products are not legal tender nor are they regulated in Kenya. The public should therefore desist from transacting in Bitcoin and similar products,” advised CBK.
Bitcoin's code was released in 2009 under the pseudonym of Satoshi Nakamoto.