Citibank analysts have warned that Kenyans have accumulated holdings of bitcoin estimated at more than Sh163 billion, which could cause widespread disruption to the economy were the cryptocurrency to collapse.
The Citi study reveals a rising popularity of the virtual currency despite regular warnings by regulators, citing a lack of legal backing.
In the report released last week, Citi analysts ranks Kenya among countries with the largest bitcoin holdings. The survey estimates Kenya bitcoin holdings are approximately 2.3 per cent of the gross domestic product (GDP) or the annual national output.
Kenya’s GDP as of 2016 stood at Sh7.1 trillion, hence the holdings stand at about Sh163.3 billion or half of the construction budget of the Mombasa-Nairobi standard gauge railway (SGR) if converted in monetary terms.
According to the Citi study, the largest bitcoin holdings as a percentage of GDP are in Russia (five per cent), New Zealand and Nigeria (four per cent), followed by Ukraine, Kenya, South Africa, the UK and Colombia in that order.
The Central Bank of Kenya (CBK) has joined other regulators around the world ratcheting up warnings against the use or accumulation of bitcoin, saying it carries risk.
The CBK has insisted 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.
But the bitcoin traders in the country have grown bolder, meeting regularly and even opening two Nairobi-based exchanges of the cryptocurrencies. The Citi report says Kenya is among countries that would “be meaningfully affected by a bitcoin price crash.”
“If bitcoin were to flop, those countries would already experience a meaningful negative wealth effect. On the other hand, for the US it is very low at 0.17 per cent,” the report warns.