Central Bank warns of Bitcoin risks

The Central Bank of Kenya Tuesday joined other regulators around the world ratcheting up warnings against the use of virtual currency Bitcoin, saying it carries risk.

The regulator said, that it should not “be held liable for any losses” incurred by consumers using digital currencies to settle transactions, as the digital currency is not a legal tender in the country.

bitcoin px

The Bitcoin.

Bitcoins are normally generated by computers and do not enjoy the backing of any central bank or by physical assets, their value depends on people's confidence in them.

READ: Kenya-based Bitcoin trading start-up raises Sh100m

“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 even these exchanges collapse or close business,” CBK warned in the notice.

bitocoin f

Australian Federal Police officers walk down the driveway after searching the home of probable creator of cryptocurrency bitcoin Craig Steven Wright in Sydney's north shore. REUTERS

China, France, European Central Bank among others have warned citizens against the lure of virtual currencies saying they have no legal backing.

Untraceable and anonymous

The CBK issued the warning as it cited several risks it said are associated with buying, holding or trading virtual currencies.

They include, “being untraceable and anonymous,” making them susceptible to abuse by criminals in money laundering and financing of terrorism.


Bitcoin minting machine. REUTERS

The Bitcoin is neither regulated nor illegal in countries such as the US, Germany and UK. More positive regulators have however said it should be used as a currency but not a legal tender.

Also read: Hackers demanded Sh6.2m in Bitcoins from NIC

The currency is also highly speculative and has since fluctuated from $340 to $1,240 posing risk to its holders. Regulators fear it could be used to support money laundering, drug trafficking, bribery and terrorism.

“The public should therefore desist from transacting in Bitcoin and similar products,” the bank said in paid advertisement in the dailies.