Monday, June 17, 2013

Could Bitcoin become the official currency of Kenya?

Its reliance on mobile technology makes the African nation a prime candidate for widespread adoption.

Could Bitcoin become the official currency of Kenya?  

In Africa, the market for cellphones is growing about 20 percent per year. Nowhere is this clearer than in Kenya, where 93 percent of households now own mobile devices. According to an article by Noel Jones in Genesis Block, this makes the country a prime candidate for widespread adoption of the all-digital currency, Bitcoin.

Like much of Africa, Kenya is without a robust technical infrastructure. For years, many Kenyans have relied on personal mobile technology for much of their communication and commerce.

Since 2007, the telecom provider Safaricom has run a mobile payment service called M-Pesa (the “M” stands for “mobile” and “pesa” is Swahili for “money”), which allows Kenyans to transfer funds and pay bills using only their cellphones. Recently, M-Pesa has gained widespread adoption—more than 30 percent of the country’s GDP now moves through the service. In turn, stores and restaurants have adapted to allow customers to pay with their M-Pesa accounts. The result is a country ideally suited for Bitcoin.

The obvious question: Why would Kenya discard its soon to be ubiquitous M-Pesa system for a bankless Bitcoin economy?

One reason is that there are fees associated with using M-Pesa. For example, Safaricom has a sliding-scale tariff charge for money transfers. Another reason is that the government has begun taxing M-Pesa transactions. (Of course, it’s hard to imagine, if M-Pesa users all switched to Bitcoin tomorrow, that the Kenyan government would simply give up the tax revenue on 30 percent of its GDP.)

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