Kipochi, a bitcoin trading platform linked to M-Pesa, has closed operations after Safaricom terminated its mobile money connection, citing the virtual currency’s non-recognition by the Central Bank of Kenya.
The service allowed M-Pesa users to purchase, trade, make and receive remittances in bitcoins on their mobile phones.
Safaricom’s new battlefront with virtual cash traders that are linked to M-Pesa comes at a time when the Central Bank has cautioned the public against dealing with digital currencies such as bitcoin.
About two weeks ago Safaricom warned Lipisha Consortium, one of its M-Pesa customers, that it risked losing its licence if it did not cut links with BitPesa, another bitcoin trading platform.
Pelle Braendgaard, the Danish techie behind Kipochi (Swahili for wallet), said the firm was forced to close shop after operating in Kenya for more than a year.
“Kipochi has closed operations. We were only a mobile bitcoin wallet using M-Pesa that was shut down by Safaricom,” said Mr Braendgaard in an interview.
Safaricom defended its decision to sever M-Pesa links to Kipochi, saying CBK was yet to okay the trading of bitcoin in Kenya.
Unlike traditional fiat currencies that partly derive their value from the faith that users put in the issuing governments, bitcoin is not created, regulated or backed by any central bank.
Instead of being minted or printed, bitcoin is digitally created through a process named “mining” and its exchange rate with conventional bills is determined by supply and demand.
“Safaricom has no commercial agreements with Kipochi. It is important to note that as M-Pesa is regulated by CBK, we are under obligation to partner only with services which the CBK has approved,” said the Safaricom director for corporate affairs Stephen Chege.
Mr Braendgaard was however critical of Safaricom’s move, saying digital currencies can help drive financial inclusion and inter-link mobile money platforms for easy access anywhere around the world.
“Bitcoin can solve interoperability between mobile money providers both within Kenya and throughout the world,” he said.
The techie has now moved to Nicaragua where he has set up Mondome, a bitcoin-powered cash remittance platform.
Safaricom is locked in an acrimonious court battle with BitPesa - a Nairobi-based bitcoin trading platform linked to M-Pesa and partly owned by ICT Cabinet secretary Joe Mucheru – after the telco terminated mobile money payments to the platform’s payment gateway, Lipisha.
High Court Judge Joseph Onguto a fortnight ago declined to issue orders directing Safaricom to restore M-Pesa services to BitPesa, saying the matter should go for full hearing.
The ensuing legal clash between Safaricom and BitPesa sucked in the banking sector regulator, who was forced to issue a notice warning the public about use of cryptocurrencies such as bitcoin.
“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,” CBK governor Patrick Njoroge said in a stern notice dated December 15, 2015.
BitPesa, which has signed up about 4,000 users so far, vowed to continue with its business because the CBK has refused to put in place regulations to government use of digital currencies.
“CBK has not chosen to regulate bitcoin. Unregulated businesses are not illegal businesses, and BitPesa will continue to operate and maintain our headquarters in Kenya,” said Elizabeth Rossiello, chief executive of BitPesa.
Bitcoin use and value has grown exponentially since its inception in 2009 by a techie going by the pseudonym Satoshi Nakamoto.
Dealers Tuesday evening quoted the shilling at Sh44,248/Sh41,911 to one bitcoin, while the rate against the greenback was $432.93 to a bitcoin, according to data from BitPesa.