- More than 1,000 Kenyans are betting big on the unregulated, global digital currency craze and putting tens of millions of shillings at stake in pursuit of outsize gains.
- Bitcoin and Ethereum, whose values have skyrocketed in the past 10 months, are the digital currencies of choice for the Kenyan traders.
- The creator of Bitcoin is not known.
When she quit her job at a local telecommunications company, Aerlene Mugambi spent two and a half years dabbling in small businesses without success until she discovered the world of digital currency.
Fifteen months later Ms Mugambi, 38, has made online digital trading a full time job, earning her a monthly income of up to Sh100,000 and she is not about to look back.
Like Ms Mugambi, more than 1,000 Kenyans are betting big on the unregulated, global digital currency craze and putting tens of millions of shillings at stake in pursuit of outsize gains.
Bitcoin and Ethereum, whose values have skyrocketed in the past 10 months, are the digital currencies of choice for the Kenyan traders.
Not even a Central Bank of Kenya (CBK) warning about the risks of putting money in currencies that are not backed by any regulator could dampen the eager punters who meet every Tuesday, Thursday and Saturday at an upmarket building in Nairobi’s Upper Hill area.
Bitcoin is a trust-based, digital currency that is not backed by any government or underlying asset, but commands its value from scarcity and universal tradeability.
The creator of Bitcoin is not known.
The Business Daily attended one of the Bitcon traders’ meeting in Nairobi, which has about 1,000 members.
Each member pays a minimum of Sh70,000 for membership and a starter trading deposit, which translates to a conservative minimum of about Sh70 million invested in the little-understood digital currency.
The Bitcoin craze has become particularly pronounced this year, with a single unit now fetching upwards of $7,500 (Sh772,000), up from $968 (Sh100,000) at the beginning of the year.
Ethereum, a newer entrant into the cryptocurrency space, has risen from $8.10 (Sh834) a unit in January to $322 (Sh33,000) by yesterday.
The Kenyan traders have formed clubs to pool their resources and invest in Bitcoins, mainly to do what is known in cryptocurrency lingo as mining.
“I was doing other things until I realised that you can capitalise on this business of digital currency and make some good returns out of it. This is what I do full time, combining that with going to educate people about Bitcoin, whether they want to buy coins or mine,” says Ms Mugambi.
She is also a member of the AchieversKlub Kenya that is affiliated to global mining unit BitClub Network that has its main facility in Iceland.
Mining involves setting up powerful computer processors that are used to verify global Bitcoin transactions — based on an online digital register— and in return the person is issued a certain number of Bitcoins in exchange.
It is the primary means for issuance of new Bitcoins into the market and it also plays the role of the central exchange for the currency.
The age profile of the AchieversKlub’s attendees is surprisingly diverse, with a mix of young professionals and middle-aged business people who take the trade as a side hustle to earn passive income.
The initial joining fee of Sh70,000 covers membership fee and one share, from which the new member starts earning a slice of the mining income of BitClub Network, which has 150,000 members drawn from 90 countries.
Those bringing in new members also earn a commission. In Kenya, the idea of a referral for commission raises comparisons with multi-level marketing or pyramid schemes, the latter having caused untold pain to the public.
The digital currency wave has had its doubters, among them central banks and several prominent business leaders globally.
The CBK issued a public notice in December 2015 warning the public to desist from transacting in virtual currencies.
Like many of its peers globally, the CBK pointed to the fact that these currencies carry heavy risk due to their lack of regulation and backing by an underlying asset, warning consumers they would lose their money without having any legal redress in the event these exchanges collapse or close business.
The regulator had not responded to the Business Daily's queries on Bitcoin trading in Kenya by the time of going to press.
“In case of dispute, the recourse avenues available to traders are very limited, restricted only to instituting a civil case between the parties,” said Justice Gatuyu, an advocate who has been tracking the advent of the digital currencies.
In China, the government has been cracking down on Bitcoin, which has spawned a huge industry in the country with huge mining farms that take up a large amount of electricity to power their powerful processors.
Kenyans have, however, been content to overlook these risks instead focusing on the promise of huge returns compared to limited returns from the traditional investment classes.
Raymond Kaptich, a 42-year-old civil engineer, is also a director at the club. He told the Business Daily that he has also taken up Bitcoin trading full time, having previously done private engineering work for 10 years, including handling contracts for Kenya Power’s Last Mile connectivity programme.
Mr Kaptich argues that there is risk in all investments, while defending Bitcoin from claims that its obscurity is also leading to use in financing illegal activities.
“While the CBK raised the issue that digital currency can be used for illegal activities, the same applies for hard currency. Every digital platform you use to trade has an IP address, therefore every wallet can be traced,” he says.
“Saying that you’re on your own in the event of loss of Bitcoin…this applies everywhere, irrespective of whichever investment you make.”
Independent analyst Aly-Khan Satchu says that what has been happening in Kenya is part of a global movement towards the mainstreaming and acceptance of Bitcoin.
“The price volatility is unprecedented though, and investors need to have a sky-high tolerance for risk,” says Mr Satchu.
Pointing to the demand-driven rise in price, Mr Satchu says that eventually, cryptocurrencies are likely to be accepted as a legitimate investment class.